PPP Loan Update and July 15, 2020 Deadline Reminders

Good Morning,

Please see below for a PPP Loan update and reminders about the upcoming tax deadline.

Revised PPP Loan Forgiveness Application

The SBA recently issued revised Paycheck Protection Program (PPP) Loan Forgiveness Applications to reflect recent favorable changes to the forgiveness calculation. These applications and instructions are accessible below:

The EZ Application is available if the borrower meets any one of the following:

Borrower is a self-employed individual, independent contractor, or sole proprietor who had no employees at the time of the PPP loan application and did not include any employee salaries in the computation of average monthly payroll in the loan application
Borrower did not reduce wages of any employee (earning $100,000 or less) by more than 25% and did not reduce number of employees or average paid hours of employees
Borrower did not reduce wages of any employee (earning $100,000 or less) by more than 25% and was unable to operate at the same level of business due to requirements or guidelines issued by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, due to COVID-19

Key updates are as follows:

Wages eligible for forgiveness include maximum salary and wage amounts per employee of $46,154 for a 24-week period or $15,385 for those electing the eight-week covered period, based on a maximum annual salary of $100,000
For owner compensation (including owner-employee, self-employed individual, or general partner), the maximum loan forgiveness will be $20,833 for a 24-week covered period (2.5/12 of 2019 net profit) or $15,385 for those electing an eight-week covered period (8/52 of 2019 net profit)
Safe harbors for excluding reductions in full-time equivalent employee levels and wage reductions can be applied as of the date on which the loan forgiveness calculation is submitted
Retirement costs for S corporation owners are eligible costs; however, health insurance costs for S corporation owners are not eligible costs

PPP borrowers should expect to receive more specific details regarding documentation requirements from their financial institution lenders. Additionally, another round of Frequently Asked Questions guidance should be forthcoming very soon. Additional guidance is needed for certain open questions, including clarification of the following:

Who falls into the category of “owner-employee”?
What types of expenses qualify as “utilities” and “transportation” costs

July 15, 2020 Deadline Reminders

We previously communicated at the beginning of the COVID-19 pandemic that we would file extensions on behalf of all clients. However, when the automatic extensions were granted, there was no longer a need to file for additional time. Accordingly, if we have not received your information, and if additional time is needed past July 15, 2020 to file your returns, we will coordinate an extension request.

The following are the most common types of returns and payments due July 15, 2020, under the automatic extensions currently in place, unless additional extensions are filed:

2019 Individual income tax returns and balance due
2020 Individual first and second quarter estimated tax payments
2019 Individual gift tax returns and balance due
2019 C corporation income tax returns and balance due
2020 C corporation first and second quarter estimated tax payments
2019 Fiduciary income tax returns and balance due
2020 Fiduciary first and second quarter estimated tax payments
2019 Nonprofit information and unrelated business income tax returns and balance due
2020 Nonprofit unrelated business income tax first and second estimated tax payments

If you have received a PPP loan, there is a possibility you will have a 2020 estimated income tax liability. While the anticipated forgivable loan proceeds are not taxable, the expenses incurred, which allowed the loan to be forgiven, are currently not deductible. So, unless there is tax legislation passed in the future to the contrary, the forgivable loan proceeds are, in essence, taxable.

We are ready to assist with calculations and to provide guidance, so please feel free to contact us at any time.

We wish you continued health and safety.

The Partners of

Russell Thompson Butler & Houston, LLP

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