New PPP Loan Forgiveness Guidelines and Applications Released (06-17-20)
A revised PPP loan forgiveness application and guidelines, and a new “EZ” loan forgiveness application, have been released to incorporate the changes made by the Paycheck Protection Program Flexibility Act and provide additional guidance. PRESS RELEASE – SBA and Treasury Announce New EZ and Revised Full Forgiveness Applications for the Paycheck Protection Program
The application and revised interim rules clarify that, for borrowers using the new 24-week loan forgiveness covered period, the maximum compensation eligible for loan forgiveness:
- Per employee is increased to $46,154 (24 ÷ 52 × $100,000) plus covered benefits such as health care, retirement contributions, and state payroll taxes; and
- For owners, is capped at 2.5 months of 2019 compensation, with a maximum of $20,833 (2.5 ÷ 12 × $100,000). Note: The application specifically lists self-employed individuals, general partners, and owner-employees, so it appears corporation owner-employees are included in this cap.
The new application instructions also clarify that:
- Eligible payroll costs do not include any employer health insurance contributions made on behalf of self-employed individuals, general partners, or S corporation owner-employees;
- Employer retirement contributions made on behalf of a self-employed individual or general partner are also excluded from payroll costs; and
- Employer retirement contributions on behalf of owner-employees are capped at 2.5 months’ worth of the 2019 contribution amount. This limit is included on the EZ application but is not included on the full forgiveness application or in the updated interim final rule, but it is possible it will be added in the future.
The new simplified EZ application is available to be used by borrowers who:
- Are self-employed and did not list any employees on their original loan application; or
- Have employees, but are not subject to any loan forgiveness reduction due to salary or full-time equivalent employee reductions.
The revised interim rules and loan applications and instructions are available at:
PPP Loan Forgiveness Extension Bill Sent to President (06-04-20)
The Paycheck Protection Program Flexibility Act of 2020 (H.R. 7010) was passed by the House and Senate and is now on its way to the President. The President has indicated that he will sign the bill.
Key provisions of the bill include:
- Extending the loan forgiveness covered period from eight weeks to 24 weeks from the loan origination date, as long as the covered period does not extend beyond December 31, 2020. This means that borrowers will now be able to have all PPP loan amounts paid during this extended covered period forgiven as long as the amounts are expended for qualified purposes (payroll, rent/mortgage interest, and utilities). Borrowers who received the loan prior to the bill’s date of enactment may still elect to use either the original eight-week loan forgiveness period or the new 24-week period;
- Only allowing loan forgiveness if at least 60% of the total loan proceeds are used for payroll costs. Currently, forgiveness is limited so that at least 75% of the forgiveness amount is for payroll costs;
- Eliminating the full-time employee equivalent employee reduction provision if the business can document that the reduction was due to the business’s inability to:
- Rehire individuals who were employees on February 15, 2020, and hire similarly qualified employees for unfilled positions by December 31, 2020; or
- Return to the same level of business activity as the business was operating at before February 15, 2020, due to compliance with sanitation, social distancing, or any other worker or customer safety requirement related to COVID-19 imposed by specified federal agencies during the period beginning on March 1, 2020, and ending December 31, 2020;
- Allowing for a five-year rather than a two-year maturity date for:
- All loans made on or after the bill’s date of enactment; and
- Loans made earlier than that date, if both the lender and borrower mutually agree;
- Deferring payments of principal, interest, and fees on any PPP loan until the SBA remits the borrower’s loan forgiveness amount to the bank (previously, this period was six months to one year from the loan origination date); and
- Allowing taxpayers to qualify for payroll tax deferral even if they’ve received PPP loan forgiveness.
Don’t be fooled during this critical time.
Read more about how scammers are taking advantage of the Coronavirus Pandemic
Taxpayers should be on the lookout for calls and email phishing attempts regarding the Coronavirus, or COVID-19 that could lead to tax-related fraud and identity theft. Because criminals take every opportunity to perpetrate a fraud on unsuspecting victims during times of need, taxpayers should also be skeptical about text messages received and websites and social media attempts to request money or personal information.
Seniors should be especially careful at this time. In most cases, the IRS will deposit economic impact payments (sometimes called recovery rebates or stimulus payments) into the direct deposit account taxpayers previously provided on tax returns and taxpayers should not provide their direct deposit or other banking information for anyone to input on their behalf into the secure portal.
For retirees, the $1,200 payments are sent automatically. There is no additional action or information is needed on their part to receive this. Retirees – including recipients of Forms SSA-1099 and RRB-1099 − should also know that they will not be contacted by the IRS via phone, email, mail or in person asking for any kind of information to complete their economic impact payment.
What to Watch Out For:
Scammers use a number of techniques including:
- Emphasizing the words “Stimulus Check” or “Stimulus Payment.” The official term is economic impact payment.
- Asking the taxpayer to sign over their economic impact payment check to them.
- Asking by phone, email, text or social media for verification of personal and/or banking information saying that the information is needed to receive or speed up their economic impact payment.
- Suggesting that they can get a tax refund or economic impact payment faster by working on the taxpayer’s behalf. This scam could be conducted by social media or even in person.
- Mailing the taxpayer a bogus check, perhaps in an odd amount, then tell the taxpayer to call a number or verify information online in order to cash it.
Unsolicited emails, text messages or social media attempts to gather information that appear to be from either the IRS or an organization closely linked to the IRS, such as the Electronic Federal Tax Payment System (EFTPS), should be forwarded to email@example.com.