Although the forgiveness of Paycheck Protection Program (PPP) loans is a primary issue on the minds of borrowers and certified public accountants who advise them, experts say borrowers should not rush to apply for forgiveness .
Long-awaited FAQs that are expected to clarify many PPP-related issues are still pending from the Small Business Administration (SBA) and the US Treasury. Also, the loan forgiveness application has not been updated to reflect the recent five-week extension of the program deadline until August 8.
A big reason for these delays is that Congress is debating a new round of COVID-19 aid, which is expected to include a second, more specific PPP initiative than the first, said Mark Peterson, the executive vice president who heads the defense team. from AICPA in Washington, DC Those discussions may also include important changes that relax the forgiveness requirements for smaller loans, possibly those up to $ 100,000 or $ 150,000.
“The situation is very dynamic,” Peterson said Thursday during the weekly AICPA town hall that covers PPP and other issues related to COVID-19’s recession and recovery efforts.
Erik Asgeirsson, CEO of CPA.com, AICPA’s business and technology subsidiary, said during City Hall that the SBA and Treasury are not expected to post the FAQs 25-30 before President Donald Trump signs a new relief legislation. Congress is trying to put together a package before going into recess on August 8.
Even if the frequently asked questions come out, the SBA issued a procedural notice on Thursday stating that it will not begin accepting PPP forgiveness shipments from lenders until a new software-as-a-service platform currently in development takes effect on August 10. . The SBA said the release could be delayed if the new legislation changes the forgiveness process to require changes to the new platform.
The SBA notice adds another reason to wait to work on PPP loan forgiveness applications to covers in an AICPA blog post that was released on July 14, said Mark Koziel, CPA, CGMA, executive vice president of practice. of the Association of Certified International Professional Accountants.
“We have to be as patient as possible,” he said.
The True PPP Forgiveness Deadline
Kari Hipsak, CPA, CGMA, the association’s senior manager, said in an interview that the important deadline in the PPP forgiveness process does not come until 10 months after the end of the covered period of the loan.
At that time, if no forgiveness forms have been submitted, the funds are officially converted into a loan that must be repaid. Hipsak said it is better for borrowers to take their time and make sure they have as much information as possible in order to maximize loan forgiveness.
“There is no need to rush forgiveness,” he said. “I think many businesses want to leave forgiveness behind, but there are still many unanswered questions. And as long as there is no deadline for submitting this application, other than 10 months after the end of the covered period, it’s really a business decision. “
Some additional considerations related to PPP forgiveness include:
Questions about utilities. Utilities are among the items in addition to the payroll that borrowers can pay with PPP funds. But there are questions about what qualifies as a utility under the PPP guide.
“It includes the basics, like garbage collection, water, electricity, etc., but we get a lot of questions about business-specific utilities,” Hipsak said. “And there is even some guidance that indicates that transportation costs, like fuel for a commercial vehicle, are inclusive. But we still don’t have all the answers for that. “
Internet services, which have become even more vital in this time of social estrangement, appear to qualify as public services under the PPP, Hipsak said.
Many exceptions to full-time equivalent (FTE) rules. The PPP was designed to help organizations continue to pay their employees as pandemic and slowdown-related closings reduce revenue. As a result, employers who reduce their workforce generally see a reduction in the amount of their PPP waiver eligibility.
But there are numerous exceptions for situations like:
- An employee who was offered the opportunity to return to a position but declined.
- An employee who was terminated for cause or voluntarily resigned.
- An employee who voluntarily requested and received a reduction in hours.
There are also additional exceptions to the FTE and salary rules, and borrowers should be aware of them when applying for forgiveness.
Clarification needed for independent borrowers. The PPP guideline states that self-employed people must compare their 2020 earnings with their 2019 earnings to determine their maximum eligible compensation. “If you’re a freelance worker, how do you prove what they paid you in 2020?” Hipsak said. “That is a big question that remains for self-employed people.”
Documentation is critical. Forgiveness applications are extremely detailed, and the final rules are uncertain in some areas.
Certain documentation is not required for the shipment with the application for forgiveness, but the borrower must keep it. Therefore, it is important to keep documentation of any event that may become a problem related to forgiveness.
“It is always easier to be prepared for something than to have to look back and collect all the necessary data,” Hipsak said.
AICPA experts discuss the latest on PPP and other small business aid programs during a weekly virtual town hall. Webcasts, which provide CPE credit, are free to AICPA members. Go to the AICPA Town Hall Series website for more information and to register.
the AICPA Paycheck Protection Program Resource Page It contains resources and tools produced by AICPA to help address the economic impact of the coronavirus.
For more news and reports on coronavirus and how CPAs can handle the challenges related to the outbreak, visit the JofA‘s coronavirus resource page or Subscribe to our email alerts for giving PPP news.
– Jeff Drew ([email protected]) is a JofA principal editor, and Ken Tysiac ([email protected]) is he JofAThe editorial director.
