EIDL is Accepting Applications For All Businesses
As of June 15, the SBA has reopened the Economic Injury Disaster Loan (EIDL) and EIDL Advance program for ALL qualified small businesses. If you have not applied and need additional access to low-cost capital, we recommend applying as soon as possible. While the application is open until December 16, 2020, the funds are first-come-first-serve and are limited.
Important PPP Updates
There have been important updates from the SBA regarding how your Paycheck Protection Program (PPP) loan will be forgiven.
The PPP loan forgiveness timeline has been extended. PPP loan funds may now be used up to 24 weeks from the date of funding. Previously, SBA guidelines stated that a PPP loan had to be used within 8 weeks of the funding date in order to be considered for forgiveness.
Additional highlights to be aware of:
• If you borrowed before today, June 5, 2020, you will need to opt-in to the new 24 week period
• If you borrowed before today, June 5, 2020, you will need to opt-in to the new 24 week period
• New borrowers (anyone funded after June 5, 2020) will be automatically enrolled in the 24 week forgiveness period
• The payback period for PPP loans has extended from 2 years to 5 years
• At least 60% of PPP funds must be spent on payroll costs (this threshold was previously 75%) or no part of your loan will be forgiven
• The timeline to use PPP funds has been extended to 24 weeks, but may not extend past December 31, 2020.
If you have not yet applied for a PPP loan, now is your time to act. The deadline is June 30, 2020. Apply now.
I have a very small business. Are PPP loans mostly for larger enterprises?
No. In fact, the SBA has published transparency information which shows that most approved loan amounts are for under $50,000.
Can I apply for a 2nd PPP loan or increase my current loan amount?
No. You may not apply for a second PPP loan if you have already been funded. Your current loan amount cannot change based on these updates.
The SBA PPP Program is Still Funding!
They have approximately $100B left in the fund as of this writing! But the money won’t last forever!
If you’ve applied elsewhere, but no funds have been awarded to you, try this link below as a backup? Meaning, take the money, with whomever gives it to you first!
What does this mean for you?
There is a Plan B! You can still get in line or in the queue for the next round of funding!
SBA Notice: Additional Funding Notice
The SBA will resume accepting Paycheck Protection Program applications from participating lenders on Monday, April 27, 2020 at 10:30am EDT.
With the additional funding provided by the new COVID-19 relief package, SBA will resume processing EIDL Loan and Advance applications that are already in the queue on a first come, first-served basis.
The SBA will provide further information on the availability of the EIDL portal to receive new applications (including those from agricultural enterprises) as soon as possible.
SBA Notice: Lapse in Appropriations
SBA is unable to accept new applications at this time for the Paycheck Protection Program or the Economic Injury Disaster Loan (EIDL)-COVID-19 related assistance program (including EIDL Advances) based on available appropriations funding.
EIDL applicants who have already submitted their applications will continue to be processed on a first-come, first-served basis.
To learn more about the relief options available for your business, click here.
SBA publishes new PPP guidance for the self-employed and general partners
The U.S. Small Business Administration issued a new interim final rule Tuesday that supplements the guidance for the Paycheck Protection Program (PPP) included in the first interim final rule for the PPP issued on April 2 and FAQs that are being updated periodically.
The additional guidance provides specific information on calculating the maximum loan amount for individuals with self-employment income who file a Form 1040, Schedule C, Profit or Loss From Business. The 2019 Form 1040 Schedule C is required to be provided with the PPP loan application, according to the interim rule, which notes that detailed documentation guidelines are also required. Guidance is also provided on how PPP loans may be used and how loan forgiveness will be calculated.
The SBA stated it will issue additional guidance for those individuals with self-employment income who: (1) were not in operation in 2019 but who were in operation on Feb. 15, 2020, and (2) will file a Form 1040 Schedule C for 2020.
Additionally, the new guidance directs that the self-employment income of partners in a partnership may be reported as a payroll cost, up to $100,000 annualized, on a PPP loan application filed by or on behalf of the partnership (or LLC filing taxes as a partnership). Individual partners may not submit a separate PPP loan application as a self-employed individual.
The guidance also addresses the eligibility issues of certain business concerns and requirements for certain pledges of PPP loans.
Congress created the PPP as part of the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136. Under the PPP, Treasury and the SBA are offering $349 billion in forgivable loans that small businesses damaged by the COVID-19 pandemic can use to cover costs including payroll, rent, utilities, and mortgage interest.
Businesses with no more than 500 employees began applying for the loans on April 3. The application window opened April 10 for those with self-employment income who file Schedule C with their Form 1040. This includes independent contractors, gig workers, and sole proprietors, including those who have other employees.
As of the close of business on Monday, the SBA had approved $242 billion in PPP loans to 1.01 million small businesses through 4,662 approved SBA lenders, according to a tweet Tuesday from U.S. Sen. Marco Rubio, R-Fla., one of the biggest supporters of the program.
The CARES Act established the PPP as a new 7(a) loan option overseen by Treasury and backed by the SBA, which is authorized to provide a 100% guarantee to lenders on loans issued under the program. The full principal amount of the loans and any accrued interest may qualify for loan forgiveness if the borrower meets requirements related to having employees on payroll.
The AICPA’s Paycheck Protection Program Resources page houses resources and tools produced by the AICPA to help address the economic impact of the coronavirus.
Jeff Drew- JofA senior editor
Paycheck Protection Program (PPP): Loan Guidelines for Sole Proprietors and Independent Contractors
The U.S. Treasury Department issued Beginning Friday, April 10, 2020, banks are accepting Paycheck Protection Program (PPP) loan applications from sole proprietors and independent contractors.
In order to qualify, you needed to have begun operations prior to February 15, 2020. Proceeds from the PPP loan can be used to cover your mortgage, rent, office lease, utilities, payroll costs, and your net self-employment earnings. For those that have a home office, you can claim a portion of the mortgage, rent and utilities based on the percentage of your home used as a home office. If the loan proceeds are used for those expenses in the 8 weeks following receipt of the funds, the loan will be forgiven.
How much can you borrow?
You are allowed to apply for 2.5 times your average monthly payroll costs. The CARES Act defines payroll costs for sole proprietors and independent contractors as:
“The sum of payments of any compensation to or income of a sole proprietor or independent contractor that is a wage, commission, income, net earnings from self-employment, or similar compensation and that is in an amount that is not more than $100,000 in 1 year, as prorated for the covered period.”
The nature of the income that applies to the PPP must be subject to either the payroll tax or self-employment tax. Sole proprietors report their business income and expenses on Schedule C of their individual income tax return, Form 1040. The net earnings from Schedule C, which is found on line 31 of Schedule C, is subject to self-employment tax. Independent contractors can either report their income on Schedule C or as Other Income on Schedule 1, line 8. As long as the Other Income is subject to self-employment tax, it applies to the PPP calculation.
PPP Loan Calculation for Businesses with Employees
For businesses with employees, you simply take the net self-employment earnings from Schedule C line 31, add back employee wages, employer health insurance costs for employees, and employer retirement plan contribution for employees. Take that number and divide by 12 months to get your average monthly “payroll cost.” Then multiply by 2.5.
Keep in mind that the wages for any employee, as well as the net self-employment income from Schedule C line 31, may not exceed $100,000 for the purposes of this calculation.
PPP Loan Calculation for Businesses without Employees
For businesses without employees, you simply take the net self-employment earnings from Schedule C line 31, and/or Schedule 1 line 8, divide by 12 months to get your average monthly “payroll cost.” Then multiply by 2.5.
What about self-employed deductions such as home office expense, ½ self-employment tax deduction, self-employed retirement and health care deductions? How are those factored into the PPP calculation?
Net self-employment earnings reported on Schedule C line 31 is after the home office deduction, which is line 30 of Schedule C. That deduction will cause a reduction in the average monthly payroll cost. The deductions for ½ self-employment tax, self-employment health insurance, and self-employment retirement plans (like a SEP IRAs or solo 401ks) are not factored into the net self-employment earnings calculation. They are adjustments to income to arrive at Adjusted Gross Income, not adjustments to arrive at net self-employment earnings. Likewise, backing out the ½ self-employment tax is only used to determine the amount of net self-employment income subject to self-employment tax. It does not change the net self-employment earnings number.
What if you have multiple Schedule C businesses?
If you have multiple Schedule C businesses, you can include the net self-employment earnings from each entity in the PPP calculation.
What documentation will need to be attached to the application?
The language in the CARES Act briefly touches on the documents needed for the loan application, stating the need to provide:
“Documentation as is necessary to establish such individual as eligible, including payroll tax filings reported to the Internal Revenue Service, Forms 1099–MISC, and income and expenses from the sole proprietorship, as determined by the Administrator and the Secretary.”
Business income and expense can be established with either the 2019 Form 1040, Schedule C and/or internal financial statements (balance sheet and income statement). In normal times, a Schedule C would carry more weight. These aren’t normal times and financial statements may suffice. But it’s ultimately up to the Administrator and the Secretary. Your lender may ask you to provide additional document based on their internal requirements. At minimum, you should be prepared to include the following documents (if applicable):
- 2019 tax return, including Schedule C. and/or Schedule 1.
- If your 2019 tax return is not complete, attach the 2019 financial statements along with a 2018 tax return.
- All 2019 Form 1099-MISC.
- 2019 payroll tax forms 940/941.
- Any other documents that can substantiate income, including invoices, bank statements, and earnings statements.
In order to have your loan forgiven, you must spend at least 75% of the loan funds on payroll costs, which include an amount for owner compensation based upon 2019 net earnings. The remaining amount, which cannot exceed 25% of the loan proceeds, must be spent on interest on a mortgage, a loan secured by personal property used in the business, rent, and utilities. To the extent that these expenses are incurred in connection with a home office, only the tax deductible portion will apply. Additionally, these expenditures must take place within the 8 weeks following receipt of the loan proceeds.
The SBA designed loan application can be found here. Banks have their own applications and are generally requiring that borrowers use those.
The CARES ACT Simplified
We simplified the details to help you understand both if you qualify and how you can apply for these programs.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed and signed into law on Friday of last week. This bill contains many parts, several of which pertain to small businesses. We will discuss the Paycheck Protection Program, the Employee Retention Payroll Tax Credit and the Employer Payroll Tax Deferrals.
SBA Disaster Assistance in Response to the Coronavirus
The U.S. Small Business Administration is offering designated states and territories low-interest federal disaster loans for working capital to small businesses suffering substantial economic injury as a result of the Coronavirus (COVID-19). Upon a request received from a state’s or territory’s Governor, the SBA will issue under its own authority, as provided by the Coronavirus Preparedness and Response Supplemental Appropriations Act that was recently signed by the President, an Economic Injury Disaster Loan declaration.
- Any such Economic Injury Disaster Loan assistance declaration issued by the SBA makes loans available statewide to small businesses and private, nonprofit organizations to help alleviate economic injury caused by the Coronavirus (COVID-19). This will apply to current and future disaster assistance declarations related to Coronavirus.
- The SBA’s Office of Disaster Assistance will coordinate with the state’s or territory’s Governor to submit the request for Economic Injury Disaster Loan assistance.
- Once a declaration is made, the information on the application process for Economic Injury Disaster Loan assistance will be made available to affected small businesses within the state.
- The SBA’s Economic Injury Disaster Loans offer up to $2 million in assistance and can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing.
- These loans may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact. The interest rate is 3.75% for small businesses. The interest rate for non-profits is 2.75%.
- The SBA offers loans with long-term repayments in order to keep payments affordable, up to a maximum of 30 years. Terms are determined on a case-by-case basis, based upon each borrower’s ability to repay.
- The SBA’s Economic Injury Disaster Loans are just one piece of the expanded focus of the federal government’s coordinated response, and the SBA is strongly committed to providing the most effective and customer-focused response possible.
- For questions, please contact the SBA disaster assistance customer service center at 1-800-659-2955 (TTY: 1-800-877-8339) or e-mail firstname.lastname@example.org.
We are virtual and we are open!
At A Simple Office Solution, our hearts go out to everyone affected by the coronavirus (COVID-19). Since our employees are safe and healthy working in a virtual environment, our priority is to now help other businesses by providing the highest level of service remotely.
The asimpleofficesolution.com website, Bookkeepers, Accountants, and Customer service representatives are working and operating as usual with no interruptions in service. As a business owner myself, I know how useful efficient support is during unforeseen times. We want you to know that our dedicated team of accounting professionals are ready to help you:
• Taxes: Personal and Business
• Controller and Audit
• And so much more!
Please let us know how we can help you continue your daily operations as we also support your growth. We hope you and your families stay healthy.
Tax Day now July 15
Treasury, IRS extend filing deadline and federal tax payments regardless of amount owed
WASHINGTON- The Treasury Department and Internal Revenue Service announced today that the federal income tax filing due date is automatically extended from April 15, 2020, to July 15, 2020.
Taxpayers can also defer federal income tax payments due on April 15, 2020, to July 15, 2020, without penalties and interest, regardless of the amount owed. This deferment applies to all taxpayers, including individuals, trusts and estates, corporations and other non-corporate tax filers as well as those who pay self-employment tax.
Taxpayers do not need to file any additional forms or call the IRS to qualify for this automatic federal tax filing and payment relief. Individual taxpayers who need additional time to file beyond the July 15 deadline, can request a filing extension by filing Form 4868 through their tax professional, tax software or using the Free File link on IRS.gov. Businesses who need additional time must file Form 7004.
The IRS urges taxpayers who are due a refund to file as soon as possible. Most tax refunds are still being issued within 21 days.
Hello ASOS Family and Friends,
As efforts concerning the containment of COVID-19 (Coronavirus) expand and evolve here in the U.S. and around the world, we want to assure you that we are focused on three things:
- Ensuring the safety of our employees
- Continuing to provide exceptional service to our customers
- Supporting local efforts to limit the spread and impact of COVID-19
We do not anticipate any interruption in A Simple Office Solution services.
As we are already 100% remote we are not expected to see or experience any transitions or changes to the services we provide. We feel that at this time of insecurity and drastic sweeping changes for traditional businesses it is important for us to let our clients, friends, and families know that we do not foresee any issues. It will be business as usual here for you and for us.
This means, among other things:
- Your accounts will be accessible to you and your employees as usual
- Our support staff will remain available for phone calls, emails, and live chat from 8:00 AM to 6:00 PM Mountain Time, Monday through Friday
- Our Quickbooks and ADP servers, all of which are already remotely administered, will continue to operate without interruption
We know that you are Business professionals dealing with these challenges in your own organizations as well as at home, and we’d like to recognize your efforts. Thank you for doing what you need to in order to stay safe and keep your business functioning during this uncertain time. If you have any questions, comments, concerns, please feel free to reach out to us.