What’s Going On With PPP, Yeah You Know Me!

Hello Everyone, Sorry for being a bit out of the picture last few weeks, We were down and under the weather for a bit but we’re back at it and cruising in third gear. Just in time too since Congress, Senate and the President seem to have just passed the new PPP Flexibility Act. The PPP if you’ll recall, is the Payroll Protection Plan that was embedded in the original CARES Act, which was very useful for small businesses to plug the hole but ended up creating questions for every problem it tried to answer. With the new FLEX ACT though, we should have some answers to those questions. Let’s get right to it, shall we!

So initially, The PPP loan had to be utilized 8 weeks after funding, and by June 30, 2020 – That date has now been pushed back to December 31, 2020 and 24 weeks after funding. This alone should provide businesses a lot of flexibility on utilizing the funds efficiently for their purposes. The loan forgiveness is only applicable to expenses paid during the covered period, so the additional 24 weeks and pushing back the covered period from June to December should be a big boost for small businesses, especially if our payroll costs have decreased because of the pandemic and shift in work force.

Separately, the PPP Flex Act gives us additional relief on the loan forgiveness front. Before, we were required to bring our work force back to Pre-Covid levels (Specifically as of Feb 15, 2020) when requesting forgiveness; So for example, if we had 11 employees on 2/15/20 and because of covid we were down to 5, and were unable to bring our employees back up to 11 by 6/30/20, then our forgiveness amount would be reduced. With the new rules however, there will be no reduction in the forgivable amount if we document

· That we can’t rehire employees as of Feb 15, 2020 or similarly qualified persons

· Unable to return to Feb 15,2020 levels of business activity due to compliance with rules, regulations and guidance issued by the CDC, OSHA, or HHS (Dept of Health and Human Services) during periods 3/1/20 to 12/31/20 related to standard for sanitation, social distancing or other safety related to COVID-19.

Another significant change is what we spent the PPP Money on. Initially, we wanted to spend at least 75% on payroll expenses, not including FICA Taxes, and were allowed to spend the remainder 25% on eligible expenses such as lease, rental, interest payments and utilities. The new act changes this ratio of 75/25 to 60/40, meaning that now 40% of the loan amount could be used for rent, lease, interest payments and utilities with 60% being designated for payroll expenses. Again, this allows much more flexibility for small business owners.

Lastly, the CARES Act allowed businesses to delay payroll taxes (FICA) for the rest of the year, with half due by end of year 2021 and the other half due by end of year 2022. A great deal, but was only offered to businesses that didn’t take the PPP Loan, the new Flex Act reverses that now, and allows the deferral of payroll taxes to also be taken by business that took the PPP Loan.

So to recap, we now have more time to use the funds, more flexibility on how to use the funds, and deferral on taxes for the next couple years on payroll taxes as well. We’ll be around if you have any further questions regarding any of this as every situation tends to be unique.

Best, from the team here at RWB Tax Services.

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