Tax News & Views | Start Your Engines

April 3, 2020

Racers, start your engines!  $349B of potentially forgivable small business loans become available today under the new SBA Paycheck Protection Program (PPP), and it’s first-come-first serve.  What’s troubling is that banks and businesses just got the final playbook last night to determine how the loans will be calculated and forgiven, and questions still remain.

It’s a heck of an opportunity to help businesses keep people on payroll but may see some inevitable mishaps with the volume of small businesses applying.  Here are some quick facts about the PPP:

  • Available for small businesses and nonprofits with up to 500 employees, self-employed individuals also eligible
  • Applications are made at SBA 7(a) loan providing lending institutions
  • Available through the earlier of June 30th, 2020 or when funds have been exhausted
  • To be used for payroll, interest on certain debt, rent, and utilities
  • Interest rate of 1%, 2 year term, with six month payment deferral
  • No collateral or personal guarantee required
  • Max loan is the lesser of 2.5 x average monthly payroll or $10M
  • Potential tax-free loan forgiveness for qualifying costs incurred within first 8 weeks of loan

One caveat with the PPP is that it cannot be taken in conjunction with the new Employee Retention Credit, which is a new refundable tax credit of 50% of up to $10,000 in wages per employee paid by eligible employers impacted by COVID-19.  And the new up-to-two-year payroll tax deferral brought by the CARES Act as well cannot be taken either if a businesses has any of its PPP loan forgiven.

If a business doesn’t qualify for the PPP or opts to use the Employee Retention Credit instead, other loan programs may be available.

Stay up to date on the latest via our COVID-19 resource center.

Related: AICPA’s SBA Paycheck Protection Program Resources for CPAs

Treasury Plans to Issue Stimulus Checks Soon, But Some Americans Could Wait Months – Kelly Phillips Erb, Forbes. “Timelines could be extended for those receiving paper checks. That’s because the IRS will not begin issuing paper checks until about three weeks after those direct deposits hit - likely the week of May 4th.”

FAQ on Federal Coronavirus Relief Bill (CARES Act) – Tax Foundation on Rebate Checks

Social Security recipients will automatically receive stimulus payments – Sally P. Schreiber, The Tax Adviser. “For Social Security or Railroad Retirement beneficiaries who did not file a federal income tax return for 2018 or 2019, the IRS will use the information provided to the Social Security Administration on Form SSA-1099, Social Security Benefits Statement, or to the Railroad Retirement Board on Form RRB-1099, Railroad Retirement Benefits Statement, to send the stimulus payment automatically to each beneficiary.”

IRS warns of coronavirus-related tax scams – Michael Cohn, Accounting Today. “Taxpayers and tax practitioners should be careful about falling for not only phishing emails, but also text messages, websites and social media attempts that request money or personal information.”

Emergency Paid-Leave Law Could Trigger ‘Big-Time Litigation’ – Erin Mulvaney & Jaclyn Diaz, BloombergTax. “The department said it would give employers until April 18 to comply before it took any enforcement action, but businesses can face private lawsuits now that the law is in effect.”

Related: What You Need to Know About the Tax Effects of Mandatory Leave Under the New Coronavirus Act

Families First Coronavirus Response Act: Questions and Answers - U.S. Department of Labor

You might have a tax shelter and not know it. Coronavirus could make matters worse – Shaun Hunley, Accounting Today. “The phenomenon could be even more pronounced in 2020 when several companies will be reporting losses stemming from the COVID-19 pandemic.”

What I worry about when I think about the IRS and the CARES Act – Part III – Procedurally Taxing. “ I realize it may require more programming for the IRS to accomplish [tax return free receipt of rebate checks for low income filers], but what the IRS builds today can be a foundation for future payments and other initiatives.”

Desmond Lists Further Filing Relief Among Guidance Priorities – Kristen A. Parillo, TaxNotes ($). “Desmond responded. ‘We're cognizant of that universe of taxpayers — taxable and tax-exempts — [whose deadlines] may not fall on April 15 in terms of their filing and payment obligations. . . . Stay tuned for something on that, hopefully in the very near future.’”

Expand Full Article

We're Here to Help

We are here to help
From business growth to compliance and digital optimization, Eide Bailly is here to help you thrive and embrace opportunity.
Speak to our specialists