Paycheck Protection Program (PPP) Loans
Existing PPP Loans
- Business expenses paid for with the proceeds of PPP loans are tax deductible. This is a significant tax savings for employers.
- Increases simplified forgiveness to loans of up to $150,000. It is assumed that the recently released 1 page 3508S forgiveness application will be revised (It is currently only used for loans up to $50,000)
In addition to the application, borrowers will need to provide their lenders with the following documents:
- Payroll service provider reports documenting the amount of compensation paid to employees over the 24 weeks period following deposit of loan.
2. Quarterly Tax Returns for the periods that overlap with the 24-week Period, including:
- IRS form 941 or (943 for Ag employers); and
- State Quarterly Tax Return (for California, both DE9 and DE9C)
Click Here for a user guide with instructions for downloading the required reports/tax returns from Payality’s Online Payroll Solution. Clients may also request the report/tax returns directly from their assigned Client Support Specialist (CSS). Be sure to notify your CSS of the date that the loan was deposited into your bank account.
Please keep in mind that PPP loan recipients have 10 months from the end of their 24-week covered period to apply for forgiveness (For example, if you received your loan in May 2020, the 24-week period would end in October 2020 so you would have until July 2021 to apply) without penalty, so there is no need to rush to apply for forgiveness. Also, The Treasury will need to issue the updated forgiveness application for loans of $150,000 or less.
If you received a loan of $150,000 or greater, you may download this user guide that details the reports available to determine the correct forgiveness application and this guide for downloading the required reports/tax returns.
New/Second PPP Loans
- $284 Billion for Employers who have had a 25% or greater reduction in revenues in any quarter of 2020 compared to the same quarter in 2019 qualify. This includes allowing restaurants to receive larger loans relative to their revenue.
- $12 billion carve-out that will go to Minority Depository Institutions and Community Development Financial Institutions that serve very small businesses (with 10 or fewer employees) and those in underserved and minority communities. It is unclear if businesses that would receive loans from these institutions must meet the same 25% or greater reduction criteria explained above.
- $20 billion in direct Small Business Association grants to companies in low-income communities (waiting on guidance for list of qualifying communities and application process).
- $15 billion in dedicated funding for live performance venues, independent movie theaters and cultural institutions
The Treasury/SBA has 10 days from enactment of the law to issue guidance on the application process. It will likely take the lending institutions several days to begin accepting applications thereafter. As soon as final guidance is issued, Payality will provide a detailed guide for obtaining the reporting/tax returns required to apply.
Employee Retention Tax Credit Extension
The employee retention tax credit has been extended for qualifying businesses. Businesses must have experienced at least one of the following to be eligible: (Please note, businesses receiving PPP loans are not eligible for this credit).
- The full or partial suspension of the operation of their trade or business during any calendar quarter because of governmental orders limiting commerce, travel, or group meetings due to COVID-19, or
- An employer’s gross receipts are less than 50% of its gross receipts for the same calendar quarter in 2019.
Clients who are eligible for the Employee Retention Credit have two options:
- Apply for an advance of the tax credits by filing form 7200 with the IRS.
- Notify your Payality Client Support Specialist and we will instantly apply the tax credits by reducing the amount of federal taxes collected and paid to the IRS.
Extends Sick Pay Tax Credit
The agreement provides a tax credit to support employers offering paid sick leave, based on the framework of the Families First Coronavirus Response Act, enacted in March 2020.
Payality clients may use this guide to simply report the sick pay/extended leave hours using the following earnings codes.
CVDREG – If employee is out for their own COVID-19 related illness. Up to 10 days at regular rate of pay (capped at $511 Per day)
CVDCARE – If employee is out sick to care for dependents affected by COVID-19 related illness. Up to 10 days at 2/3rd’s regular rate of pay (capped at $200 per day)
CVDFMLA – Following 10 days of sick pay, up to 10 additional weeks to care for dependents at 2/3rd’s regular rate of pay (capped at $200 per day)
The amount of sick pay paid to employees immediately reduces client’s overall federal tax liability. Payality will reduce the amount of federal taxes collected and paid to the IRS automatically.
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