Hartford Business Journal

PPP loan forgiveness update T he Coronavirus Aid, Relief, and Economic Security Act (CARES Act) is a federal economic stimulus bill passed in March 2020. Within the CARES Act is the Pay- roll Protection Program, or PPP, which includes low-interest and fully forgivable loans to help businesses cover payroll, healthcare benefits and certain business expenses. Guidance has fluctuated on the PPP and loan forgiveness. The requirements business owners may have understood a month or two ago may be different now and could change again. The answers below are current as of August 1, 2020. Michael Maksymiw Jr.is a partner with accounting and advisory firm Marcum LLP, which has a location in Hartford. Q: Is there a way I can get a PPP loan and achieve 100% loan forgiveness? Yes — if you spend the money on qualifying costs during the covered period and keep the same number of employees — paying them what you were before the covered period kicked in. A self-employed sole proprietor uses their 2019 Sched- ule C to apply for both their loan amount and loan forgiveness. A sole proprietor with no employees only has to wait until the end of their covered period to apply for and receive 100% forgiveness. If you are self-employed and have employees, your forgiveness would be based on your 2019 Schedule C (for the owner) and the qualified costs paid during the covered period, subject to the same potential loan reduc- tions as other employers. Q: What business costs are eli- gible for PPP loan forgiveness? Two categories of business costs are eligible for PPP loan forgive- ness: Payroll and non-payroll costs. Payroll costs include wages, com- pany-paid health benefits, company- paid retirement contributions, and employer-level state taxes. Non- payroll costs include rent, mortgage interest, and utilities, which are electricity, heat, internet, telephone, water, and transportation costs. The lease, debt, or utility service all must have been in place by February 15, 2020, to qualify. All costs come with specific restrictions and are detailed in the guidance. Q: Can my entire loan amount be forgiven, even if I have fewer employees compared to when the loan was granted? According to the application, loan forgiveness is the lowest of three numbers: the amount of your loan, the net of your eligible expenses less any reductions, or your payroll costs divided by 60%. Let's use the follow- ing assumptions for this example: total loan = $100,000; Full Time Equivalent employees (FTEs) during lookback period = 20; total amount spent during 24-week covered period = $180,000; pay- roll costs during covered period = $120,000; and FTE during 24- week covered period = 15. To calculate net eligible expenses, we have to reduce what we spent by the percentage of FTEs that we lost. In this example, we started with 20 FTEs and lost five, which is a 25% reduction. We spent $180,000 on qualified costs. The 25% reduction of $45,000 leaves us with $135,000 of net eligible costs. The other two of our three numbers are easier to calculate: • Loan amount = $100,000 • Payroll costs = $120,000 / 60% = $200,000 The lowest of the three numbers is the loan amount of $100,000, which means that even though there was a 25% reduction in FTEs in this ex- ample, the borrower can still receive 100% loan forgiveness. Q: Can I deduct the qualified ex- penses on my federal tax return? The short answer is no. Business expenses paid with PPP funds that are forgiven can't be deducted for federal tax purposes, according to the Internal Revenue Service (IRS). These business expenses include the payroll and non-payroll costs mentioned previously. But Congress is de- bating the status of the deductibility of these expens- es now, so that could change. Keep an eye out for legislation that could allow these expenses. Q: With details changing fre- quently, is there one source of information business owners can reference? Marcum's Coronavirus Resource Center is an online clearinghouse of all things COVID-related in terms of guiding your business operations. Content includes recaps of our tech- nical webinars, articles, breakdowns of various programs by industry, and more. Information is updated continuously. • S P O N S O R E D C O N T E N T Ask MARCUM EVER WONDER WHERE THE PEOPLE WITH ALL THE ANSWERS, GET ALL THE ANSWERS? marcumllp.com "Marcum's Coronavirus Resource Center is an online clearinghouse of all things COVID-related in terms of guiding your business operations. " Ask Expert THE

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