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The Coronavirus stimulus programs created a maze of confusion.  The programs provide opportunities for most business to get financial assistance, but it proved to be quite challenging to determine what assistance was best for you.  We assisted many of our clients with interpreting those rules so they could make the best decision on which relief programs were best for them and when the relief should be requested.  The most used program was the PPP loan/grant program.  Clients also used EIDL disaster relief grants and EIDL loans.  While others were best served by applying for the enhanced unemployment benefits. 


It is now time to focus on the next phases of this maze.  Presently we see two additional phases to the stimulus programs.  The next phase will involve requests for PPP loan relief, planning to take advantage of payroll tax savings opportunities and reconsideration of whether to apply for unemployment benefits.  This phase of the maze has many moving parts that also provide opportunities and extreme hazards.  Watch your step during this phase as the legislative and administrative landscape is constantly changing with little or no notice, not unlike the SBA packages when they first rolled out.  The third phase will be reporting these activities on your 2020 income tax return. 


The PPP loan forgiveness is presently based upon spending for gross payroll, employee benefits, utilities, interest on business loans, rent and lease payments.  Forgiven expenses do not include general operating expenses such as purchases of merchandise for sale, repairs, legal and professional fees, general insurance and so on.  Further the program requires 75% of the loan be directed toward payroll costs.   The funds must also be expended over an 8-week period with restrictions on when the period must start and finish.  


We hope, and expect, changes in the rules to make them more forgiving.  Especially for those business that have been materially impacted by Coronavirus.  There have been proposals to alter the 8 week period beginning dates, extend the period to as much as 24 weeks, eliminate the requirement that 75% of the funds be expended on payroll and expand the nature of the other expenses that may be covered by the program.  Those changes may be instituted in days or not at all.


The SBA has released the forms that have to be completed in order to request the PPP loan be converted into a forgiven grant.  At present time, there has been no specific date on which the application needs to be submitted to your lender.  Your lender may require it by a specific date, but we have not seen any requirements yet.  Once submitted, the lender has 60 days to issue a decision to SBA.  In our opinion if your business will qualify for full relief under the present set of guidelines it should submit the application for relief promptly.  On the other hand, if it cannot presently meet those guidelines it should stall until the last days while hoping for more accommodating changes.


Many businesses were confused because the interaction of the rules was different based upon your form of business as well as the nature of your business.  S corporations, partnerships, C corporations and proprietorships received different benefits.  The methods they must use now to account for the funds is also different and will cause great confusion.


We are aware that some of our clients applied for PPP funds that are well in excess of the amount they will be able to document as qualifying for grant relief under present guidelines.   We are not saying any of those clients applied in bad faith.  Instead they applied based upon poor guidance from a source other than us.  For example, some proprietorships applied based upon their gross 1099 income instead of their net income subject to self-employment taxes.  Those clients will be well advised to defer submission of documents to request relief as long as possible and hope that more generous guidelines come about.  But they should plan for the worst.  Recognize the amount that will have to be repaid and establish a plan for how to repay it within 2 years.   


We have accumulated hundreds of hours of research on these programs and we can help you complete the forms to request the relief as well as guide you in assembly of the records you need to compile in order to document your request.  


The second phase also includes additional actions you can take to secure relief.  For some these actions could not be taken during their 8-week period of ‘earning’ their PPP grants.  (For example, you could not get unemployment benefits while also funding payroll costs with PPP loans).  Those actions will involve decisions on whether the business owner should apply for unemployment benefits or obtain payroll assistance through other provisions of the CARES Act.  Those will most notably include providing paid family and medical leave to employees and credits available when there has been a substantial reduction in income due to Coronavirus related closures.  The paid family and medical leave are especially appealing when spouses and family members are active in the business and have family members at home due to Coronavirus.  Contact us and we will guide you through these decisions.


As mentioned, the third phase of this maze involves 2020 income tax returns.  We will need completed copies of all your loan forgiveness documentation for our files in order to complete your 2020 tax returns.  Please send us the information as soon as you get final determinations.  Also, when the PPP loan was introduced the legislation specifically stated the grant portion would not be treated as income.  Subsequently, the IRS has ruled that while the grant is not income the expenses used to support it being treated as a grant rather than a loan are not deductible.  This does not seem to follow Congressional intent and has been the subject of much discussion by our political leaders.  Further legislation may be introduced.  If not, there will be future court cases to contest it.  It would be exceedingly expensive to have to fight that court case on your own.  We have some time for this to be resolved.  Once again prepare for the worst and hope for the best.