Paycheck Protection Program:
The “CARES Act” establishes a new loan under the SBA called the “Paycheck Protection Program (PPP).” The loan amount will be 250% of your business’s average monthly payroll costs over the previous 12 months and can be used for payroll and certain occupancy costs. At the end of the loan’s covered period, which is February 15, 2020 to June 30, 2020, businesses can request that loan proceeds used for payroll and certain occupancy costs be forgiven. Additional details of the loan can be found here: PPP Borrower Information Sheet
EWH PLANNING TIP:
While the PPP loan can provide your business with much needed cash flow, careful consideration needs to be made on the forgiveness amount. Forgiveness will be based on employee retention through June 30, 2020, compared to an applicable base period. The applicable FTE base period is either:
- January 2020 and February 2020, or
- February 15, 2019, through June 30, 2019
If your business has significantly reduced its workforce since February 15, 2020, or plans to do so by April 26, 2020, you have until June 30, 2020 to restore your workforce to full capacity compared to the FTE base period or face having a reduced forgiveness amount.Additionally, receipt of a PPP loan will disqualify you from receiving tax credits under the Families First Coronavirus Response Act and the Employee Retention Credit. If you are forgiven any portion of the PPP loan, your business will no longer be able to defer the employer’s portion of social security payroll tax incurred March 12, 2020, to December 31, 2020. The deferment due dates on payment are 50% by December 31, 2021, and 50% due December 31, 2022 (see statement 4 below).
