News & Tech Tips

PPP Loan Forgiveness Relief for Small Borrowers

Kathleen Hargrove on October 9, 2020

The SBA and Treasury Department released additional guidance related to the Paycheck Protection Program (PPP) this week. The guidance covers a simplified forgiveness application process for loans of $50,000 or less, clarification of the deferral period for PPP loan payments, and procedures required for changes of ownership of an entity that has received PPP funds.

 

An interim final rule was issued that provides a simplified application to be used by recipients of PPP loan of $50,000 or less, and exempts these entities from and reductions in forgiveness based on reductions in full-time equivalents, and reductions in employee salary or wages. A Journal of Accountancy article detailing the changes can be found here.

 

Frequently asked question No. 52 was issued that clarifies that the Paycheck Protection Flexibility Act of 2020, P.L. 116-142,  extended the deferral period for loan payments to either (1) the date that SBA remits the borrower’s loan forgiveness amount to the lender or (2) if the borrower does not apply for loan forgiveness, 10 months after the end of the borrower’s loan forgiveness covered period. The extension of the deferral period automatically applies to all PPP loans. A Journal of Accountancy article detailing the FAQ can be found here.

 

In addition, SBA issued a procedural notice that describes when a change of ownership is considered to have occurred and the responsibilities a PPP borrower continues to hold regardless of any change in ownership. The guidance clarifies requirements and may help businesses that have been trying to go through the forgiveness process quickly because of an impending transfer of ownership. A Journal of Accountancy article detailing the procedures notice can be found here.

 

For any questions or for clarification on any of these updates, please contact your Whalen advisor for assistance.

Tax implications of working from home and collecting unemployment

Kathleen Hargrove on September 15, 2020

COVID-19 has changed our lives in many ways, and some of the changes have tax implications. Here is basic information about two common situations.

 

Working from home:

Many employees have been told not to come into their workplaces due to the pandemic. If you’re an employee who “telecommutes” — that is, you work at home, and communicate with your employer mainly by telephone, videoconferencing, email, etc. — you should know about the strict rules that govern whether you can deduct your home office expenses.

Unfortunately, employee home office expenses aren’t currently deductible, even if your employer requires you to work from home. Employee business expense deductions (including the expenses an employee incurs to maintain a home office) are miscellaneous itemized deductions and are disallowed from 2018 through 2025 under the Tax Cuts and Jobs Act.

However, if you’re self-employed and work out of an office in your home, you can be eligible to claim home office deductions for your related expenses if you satisfy the strict rules.

 

Collecting unemployment:

Millions of Americans have lost their jobs due to COVID-19 and are collecting unemployment benefits. Some of these people don’t know that these benefits are taxable and must be reported on their federal income tax returns for the tax year they were received. Taxable benefits include the special unemployment compensation authorized under the Coronavirus Aid, Relief and Economic Security (CARES) Act.

In order to avoid a surprise tax bill when filing a 2020 income tax return next year, unemployment recipients can have taxes withheld from their benefits now. Under federal law, recipients can opt to have 10% withheld from their benefits to cover part or all their tax liability. To do this, complete Form W4-V, Voluntary Withholding Request, and give it to the agency paying benefits. (Don’t send it to the IRS.)

 

We can help

We can assist you with advice about whether you qualify for home office deductions, and how much of these expenses you can deduct. We can also answer any questions you have about the taxation of unemployment benefits as well as any other tax issues that you encounter as a result of COVID-19.

PPP Forgiveness for Related Party Rent

Kathleen Hargrove on September 2, 2020

The SBA and Treasury released an interim final rule last week that in part addressed forgiveness of payments of rent paid to relate parties.

 

This rule is first mention in the guidance that related party rent will have limited forgiveness. It effectively limits forgiveness of related party rent to the amount of mortgage interest owed on the property during the Covered Period that is attributable to the space being rented by the business. In the case of an owner that owns the leased property free of debt, there will be no forgiveness.

 

Here is the full text from the rule:

 

Eligibility of Certain Nonpayroll Costs for Loan Forgiveness

 

Question b: Are rent payments to a related party eligible for loan forgiveness?

 

Yes, as long as (1) the amount of loan forgiveness requested for rent or lease payments to a related party is no more than the amount of mortgage interest owed on the property during the Covered Period that is attributable to the space being rented by the business, and (2) the lease and the mortgage were entered into prior to February 15, 2020.

 

Any ownership in common between the business and the property owner is a related party for these purposes. The borrower must provide its lender with mortgage interest documentation to substantiate these payments. While rent or lease payments to a related party may be eligible for forgiveness, mortgage interest payments to a related party are not eligible for forgiveness. PPP loans are intended to help businesses cover certain non-payroll obligations that are owed to third parties, not payments to a business’s owner that occur because of how the business is structured. This will maintain equitable treatment between a business owner that holds property in a separate entity and one that holds the property in the same entity as its business operations.

PPP Application Window Extended to August 8

Kathleen Hargrove on July 8, 2020

President Trump signed a bill Saturday re-opening the application window for the Paycheck Protection Program (PPP) until Aug. 8.

 

The five-week extension had been approved last week by both chambers of Congress. The U.S. House of Representatives and the Senate both passed the legislation by unanimous consent.

 

The House’s approval on July 1 came after the Senate passed the extension in a surprise move the night of June 30, just a few hours before the PPP application window was scheduled to close.

 

The extension keeps a source of funding open to struggling small businesses while Congress works on a second, more targeted funding program. The PPP, which has approximately $129 billion in funding remaining, was launched in early April as the COVID-19 pandemic battered the U.S. economy and forced many businesses to close. The program provides forgivable loans that small businesses and other qualifying entities can use to cover payroll and other select costs.

 

The U.S. Small Business Administration (SBA), which oversees the program with the Treasury Department, stopped accepting loan applications at midnight on June 30. The program had not yet officially re-opened as of Sunday evening, according to the SBA’s PPP home page.

 

As of June 30, the SBA had approved nearly 4.9 million loans for a total of more than $520 billion.

 

 

 

 

SOURCE: Journal of Accountancy

 

 

Updates on PPP Recipients and IRS Facility Openings

Kathleen Hargrove on June 25, 2020

There have been important updates from the SBA and the IRS this week that we wanted to pass along to you. Here is a summary of each update:

 

PPP Recipients Published

 

The SBA and Treasury have agreed to publish the names and amount ranges for all recipients of PPP loans of $150,000 or more.

 

In a news release, Treasury Secretary Steven Mnuchin and SBA Administrator Jovita Carranza said they had reached an agreement with the bipartisan leaders of the Senate Small Business Committee to make public additional data regarding the PPP.

 

Specifically, the SBA will disclose the business names, addresses, North American Industry Classification System (NAICS) codes, ZIP codes, business type, demographic data, not-for-profit information, jobs supported, and loan amount ranges as follows:

  • $150,000 to $350,000
  • $350,000 to $1 million
  • $1 million to $2 million
  • $2 million to $5 million
  • $5 million to $10 million

These categories account for nearly 75% of the loan dollars approved, according to the SBA and Treasury. For loans below $150,000, the SBA will release totals aggregated by ZIP code, by industry, by business type, and by various demographic categories.

 

 

IRS Facilities Opening

 

IRS Commissioner Charles Rettig has announced that additional IRS facilities will open on June 29 and that facilities in all remaining states will open on July 13.

 

Although the current message doesn’t specify the names of the four states, a previous message from Rettig indicated that those states are Indiana, Ohio, California and Oregon.

 

For the majority of employees who can perform their duties at home, IRS’s telework policy will remain in effect for the foreseeable future to ensure social distancing. Rettig instructs IRS employees to remain in their current work status, whether teleworking or on weather and safety leave, until hearing directly from their manager.

 

 

 

SOURCES: Journal of Accountancy

IRS.gov

 

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