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Your PPP forgiveness application

In order to complete your PPP forgiveness application;

If you received $50,000 or less, you will need the following information handy:

  • The EIDL advance amount, if any, that you received
  • The EIDL application number
  • The business’ bank statements for your covered period that begins as of the date the PPP funds were received. Your covered period was either the 8 or 24 weeks that you elected.
  • The payroll journals for the same period listed in # 3 for either the 8 or 24 week period. These journals should include:
  • Employee contribution for the employee health insurance
  • Employee contributions to retirement plans
  • State unemployment insurance
  • Each employee’s gross pay, payroll deductions, net pay and hours worked
  • Quarterly Forms 941
  • State quarterly business and individual employee wage reporting and unemployment insurance tax filings
  • Eligible non-payroll costs:
  • In order to include rent paid, you will need a copy of the lease and copies of the cancelled checks starting 2/15/20.
  • Copies of the invoices for electricity, gas, water, telephone, internet service and proof of payment (cancelled checks) starting 2/15/20
  • Payment receipts, cancelled checks, or account statements documenting the amount of any employer contributions to employee health insurance and retirement plans starting 2/15/20

If your company received more than $50,000, you will need the above information plus:

  • The last payroll journal you had in 2019. For each employee it should include:
  • Wages
  • Employee retirement contribution
  • Employee health insurance contribution
  • Hours worked
  • The amount the employer paid for their health insurance and into their retirement plan
  • The same information listed in # 1 and # 2 but for the period 1/1/20 to 3/31/20

Please note if you were unable to restore the employee full time equivalent headcount before 12/31/20, there is no reduction in potential loan forgiveness if, “in good faith” you can document the following:

  • Inability to rehire individual who were employees as of 2/15/20
  • Inability to hire similarly qualified employees for unfilled positions on or before 12/31/20 -or-
  • Inability to return to same level of business activity as such business was operating at before 2/25/20 due to compliance with requirements established or guidance issued by HHS, CDC, OSHA during the period 3/15/20 to 12/31/20 related to maintenance of the standards for sanitation, social distancing or any other worker or customer safety requirement related to COVID-19

The rules have changed regarding the safe harbor full forgiveness.  Under the initial CARES ACT, the businesses that rehired their employees by June 30, 2020 were entitled to full forgiveness but that date no longer applies. Under the second phase of the CARES ACT you need to have rehired your entire staff by the earlier of; the day you file for forgiveness or December 31, 2020. This has the unfortunate effect of negating full forgiveness if the business met the initial safe harbor date of June 30, 2020.

The borrower must retain all documentation in its files for six years after the date the loan is forgiven or repaid in full and permit authorized representatives of the SBA, including representatives of its Office of Inspector General, to access such files upon request.

Diapoules & Feinstein will gladly help you prepare the PPP loan forgiveness application. As you can understand, our work will be made easier if you forward us a complete set of the required documents.

If you have any questions or seek guidance we have posted on our website the SBA FAQ on the PPP Loan Forgiveness process or you can call our office at  631-547-1040.

Good Luck!

COVID-19 Related Tax Credits for Employers and Self Employed

For those business owners and self-employed individuals currently experiencing an adverse business environment due to COVID-19. The IRS in conjunction with Congress have a couple payroll tax credits to help with your quarterly or annual tax liabilities.

  • Employee Retention Credit:

Eligible employers can claim the employee retention credit, a refundable tax credit equal to 50 percent of up to $10,000 in qualified wages (including health plan expenses), paid after March 12, 2020 and before January 1, 2021.  Eligible employers are those businesses with operations that have been partially or fully suspended due to governmental orders due to COVID-19, or businesses that have a significant decline in gross receipts compared to 2019. Self-employed or businesses that have accepted any PPP loan proceeds from the SBA don’t qualify.

  • Credit for Sick and Family Leave:

For business owners who are dealing with an employee, who was diagnosed with COVID-19. The employee had to stay home due to a sick child or ordered to stay home due to medical advice by a professional. As a business owner you are obligated to pay that employee for the time missed (up to 10 days or 80 hours). You are reimbursed for those days/hours paid to your employee through the Qualified Sick and Family Leave payroll credit.

  • Credit for Self-Employed Individuals:

An eligible self-employed would be entitled to receive qualified sick leave and qualified family leave wages. You qualify if you were subject to a federal, state or local quarantine due to COVID-19. You have been advised by a health care professional to self-quarantine due to COVID-19. You experience symptoms of COVID-19.  If you qualify under any of the three situations listed above you then qualify for the qualified sick leave and family leave wage credit that goes right against your Self Employment Taxes.

For clarification or advice on any of the payroll tax credits discussed above you can certainly give us a call at 631-547-1040 or shoot us an email. Thank you

Are you prepared for an audit?

 

We have been noticing an alarming trend regarding our clients record keeping practices. They are more often than not insufficient thus making our job of defending you much more difficult.

What constitutes the business records needed in case of an audit?

The most obvious ones are bank statements, payroll journals and tax filings. But you will also need:

– Employee personal file (which should include W-4, copy of Social Security Card & secondary form of identification.)
– Employee time & Attendance record
– Customer Sales Invoices
– Vendor Invoices
– Credit card statements (Credit card statements are not by themselves records and you must keep the related reciepts)
– Appointment Calendar
– Correspondence
*IMPORTANT*
– Your records must be saved in an organized fashion and easily accessible.
– Electronic copies of these records are considered valid
– Make certain that your computer system is backed up daily.

If you, like the many other small businesses, are using an online accounting and or payroll program be aware that your data may not be accessible once you leave the service.

In addition to assisting us in an audit, good record keeping practices will help you if and when you have a billing dispute, labor or legal issue, or looking to value or sell your business.

Major changes made to Paycheck Protection Program

As you are probably aware, there have been major changes in the Paycheck Protection Program. The SBA now allows recipient companies an extended period in which they may be able to use their PPP funds from 8 weeks to 24 weeks. Also, only 60% of the proceeds need to be paid out as wages and the filing deadline for submitting your application for forgiveness has been extended to December 31, 2020.

Unfortunately, the Full Time Employee Equivalent safe harbor requirement date of June 30, 2020 has been pushed back to either the date their FTEE forgiveness application is filed or December 31, 2020. Recipients that may have met the terms of the safe harbor on June 30 may not be able to do so at these later dates.

You will be submitting your PPP Loan Forgiveness Application to your lender. This application can be made either on SBA forms or any application designed by your lender. It appears that many lenders are creating online applications to accept your PPP Forgiveness request.

The amount of loan forgiveness is dependent on how the funds were used, how many full time employee equivalents you had post COVID-19 versus pre COVID-19 and whether you choose to follow the original PPP rules or the revised rules.

As there are mutterings of a new set of changes coming, there appears to be no rush to apply for forgiveness. Many lending institutions are requesting that any company who received PPP funds of less than a certain amount need only to certify that they met the requirements of full forgiveness and many recipients that met the June 30 Safe Harbor are complaining that the rules were changed in mid-stream.

We will certainly be available to assist you in your application process. Our fee for this service will based on firm’s normal billing rates with a 25% discount for current business conditions.

Preparing for loan forgiveness

While you focus on running your Business the U.S. Small Business Administration(SBA) and financial institutions are working on finalizing the loan forgiveness application process for Paycheck Protection Program(PPP) loan proceeds.

When can I apply for loan forgiveness? Many of you have or soon will deplete your PPP loan proceeds and will be ready to apply for loan forgiveness we are currently finalizing the loan forgiveness online application portal which will be similar in format to how you will applied for your PPP loan. We are awaiting final instructions as to how we will submit your forgiveness application to the SBA.

As you know the PPP has been updated several times. It is possible that Congress brings forth additional legislative changes that could impact the loan forgiveness process which is why D&F are proceeding with caution and waiting for clarification before filing out forgiveness applications.

Some of the conversations have included options for simplified forgiveness processes and documentation for loan less than a certain dollar amount. There is also consideration of allowing companies hardest hit by the pandemic to apply for a second PPP loan.

We feel it is important to communicate this so you can better understand the variables affecting the timeframe for opening our loan forgiveness application portal. Know that your team is doing everything we can to provide you the simplest process possible. We will move forward as soon as we are certain that we can provide the best PPP loan forgiveness experience.

Keep documenting.

Even if Congress makes concessions for loan forgiveness documentation will still be required please continue to keep diligent records on how you are spending ppp dollars if you are unsure of what documentation you will need remember you have the option for 24 we covered. So there is no need to rush.

The value of the paycheck protection program:

The PPP has been a lifeline for millions of businesses across the country that were adversely impacted by closures. It has been humbling to be part of a program that delivered much needed aid to so many of our clients and their greatest time of need. Thank you for being our client. We are proud to be your accountants.

Congratulations On Your PPP Loan, now the hard part starts.

If you, like many other businesses, have just received your Payroll Protection Program (PPP) loan please keep the following in mind.

-PPP loans were created in the CARES Act with the stated purpose of providing a direct incentive for small businesses to keep their workers on payroll.

-PPP loan proceeds may be forgiven, in total or partially, but there are strict rules on the use of the proceeds that need to be followed.

-Total forgiveness can be achieved if a business’ pre Covid employees are kept on the payroll or rehired, all of the proceeds are used for either payroll costs, rent or mortgage interest, utilities and 75% of the forgiven amount is used for payroll costs.

-Many businesses will find the above threshold difficult to meet. In these cases a complicated formula has been devised in order for a business to determine the amount of loan forgiveness.

In order for a business to maximize its loan forgiveness it should carefully monitor and track the expenditure of the PPP proceeds. That is why we recommended that PPP loan proceeds be in a separate bank account and not the business’ operating account and that only qualified expenses should be paid from this account.

By keeping the funds in a separate account after the eight-week period you know that the remaining balance will not be eligible for forgiveness.

Other rules for calculating forgiveness that must be followed are:

Payroll cost equal 75% of the amount of the PPP loan proceeds.

-The percentage of reduction in headcount will reduce the amount forgiven proportionately.

-A per employee reduction of greater than 25% of their wages will reduce the forgiveness amount dollar for dollar.

For those businesses that are deemed to be essential a PPP loan is a godsend but nonessential businesses such as restaurants and retail establishments it can be a double edge sword. If workers that are paid but not performing any duties some of or all of their pay may not be forgiven.

As you can see there is a need to be vigilant in actively monitoring the use of the loan proceeds in order to maximize the loan forgiveness and to avoid repayment of loan proceeds for which your business may not gotten any benefit.

If you need any assistance or have any questions please feel free to contact us.

Good News from the House of Representatives

On May 28, 2020,  the US House of Representatives passed by a wide margin a bill that extends the time frame for the PPP forgiveness from 8 weeks to 24 weeks. The bill was designed to correct what many perceive as the CARES Act Paycheck Protection Program’s failure to assist hard hit businesses. The Senate has been working on a bi-partisan bill that would extend the PPP period to 16 weeks. We should expect a compromise bill to be passed in the near future.

Other News:

The Small Business Administration released its PPP Loan Forgiveness Calculation Form (SBA Form 3508) and its instruction. After analyzing the form and its instruction we have concluded that making the required calculations and providing the requested documents will take significant time and effort. You will need detailed payroll records, documentations of the use of proceeds and backup for the qualified expenses.

The SBA rules now allow businesses to choose an alternate date for the commence of the eight week payroll period. You may choose the start of this period to be the date that payroll commences in lieu of the date that the PPP proceeds were received.

What to expect:

Changes.

We participated in a Webinar with SBA officials on the subject of PPP Forgiveness that revealed that many of the particulars of the forgiveness process have not been worked out. It appears that the SBA is committed to being flexible on the application of its terms but specifics on the corrections have yet to be finalized. Our questions were frequently answered with a shrug and that the answer has yet to be determined.

A copy of SBA Form 3508 and its instruction can be downloaded from our website. Please take time to go over this form and what is required to complete it. If you have questions or in need of assistance to not hesitate to contact us.

Good luck and most of all be careful and stay healthy.

To our clients: We at DFCPA applaud you

We at Diapoules & Feinstein CPAs P.C. want to applaud all of our clients for their determination & courage in these trying times.

All of us at D&F are committed to ensuring that you have success in your future.

If we stick together, we will survive and prosper together.

Now, in the words of one our client;

“Diapoules and Feinstein CPAs PC helped me cut through the banks’ bureaucratic processing of the 2020 Coronavirus Stimulus Program. If not for Marvin Feinsteins’ diligence and perseverance, I might never have received any funds at all. His speedy and concentrated efforts were instrumental in getting me approved within hours of submitting my application to the SBA. Aside from this monumental accomplishment, Marvin is a very knowledgeable CPA who often offers has great ideas for me to implement in my business. He is honest and really cares about the success of his clients.”

  • Gary Welikson, President G and G Garments, NYC

Payroll Protection Program Loans

Good Afternoon and we hope that everyone is safe and healthy.

For Some Good News!

The SBA website for processing applications for an Economic Injury Disaster Loan (EIDL) has been updated and streamlined. They no longer require any collateral or personal guarantees. Hopefully, this time the website will not crash or be hacked. If you had inputted your information into the website prior to it crashing the SBA is offering you free credit monitoring.

A feature of the EIDL is that a $10,000 immediate grant is being issued to each applicant. This $10,000 does not have to be repaid.

The list of the information required for an EIDL is at the end of this memo. You can go onto the SBA Website to apply. The link to the application is https://covid19relief.sba.gov/#/. You can enter this information yourself or contact us and we will complete it for a slight fee.

In addition, we conferred with Daniel S Dorfman an attorney at Forchelli, Deegan and Terrana PLLP who clarified an issue that we were concerned about. You can apply for both the EIDL and the Payroll Protection Program (PPP) loan. However, a business can only apply for both if proceeds are not to be used for the same purpose. Their recommendation is to apply for the EIDL first to obtain the grant and then apply for the PPP. The one caveat is not to co-mingle the funds. The proceeds from the PPP loan should be kept in a separate bank account so as to meet the strict accounting requirements prescribed for forgiveness of all or part of PPP loan proceeds.

We have also attached the information required for the PPP loan. A business applying for a PPP loan needs to contact their bank to see if they are a prescribed SBA lender. If the bank is an SBA approved lender applying for the loan should be done on the bank’s website. As of yesterday, we are not aware of any bank whose website is operational and ready to accept application. Most banks that we have contacted seem to have Friday as the go live date for their PPP online applications.

There are three steps in applying for the loan and we have enclosed a spreadsheet outlining the steps and the information that is needed. Keep in mind that the PPP proceeds used for the payment of payroll costs, rent and utilities will be all or partly forgiven. If you need assistance please contact our office.

We are in a stressful and unprecedented time when we must first be concerned about our and our loved one’s health and safety and then to attend to our business. If you need any assistance or just someone to talk don’t hesitate to reach out to D&F.

Download our PPP Application PDFs here.

If you need any assistance please contact us.

Diapoules & Feinstein CPAs P.C.

Alert to all of our clients

Hold off on your Small Business Administration (SBA) Disaster Loan Application- There is a better alternative contained in a provision in the recently passed “Cares Act”.

The provision is the Payroll Protection Program. This a $350 billion dollar program specifically dedicated to small businesses. Although the SBA oversees this process, you must apply through a participating bank.  Contact your bank to see if they’re part of the program.  The program bypasses the SBA loan process and is designed to have a turn-around time of only 36 hours.

In addition, the program requires a minimal amount of paperwork, you will not have to sign a personal guarantee, and there is a loan forgiveness provision that can turn all or part of the loan into a non-taxable grant. There is one caveat, you cannot partake in this program if you have already submitted an application for an SBA Disaster Loan.

So please hold off on applying for a SBA Disaster Loan and contact your bank. To discuss this program, you can contact us at info@dfcpaonline.com or you can reach us at (631) 547-1040. We will be happy to assist you.

Good luck and stay safe!

We are here for you.

Diapoules & Feinstein CPAs P.C.