COVID-19 Financial Relief CARES Act: PPP Loans Q&A

What is the Paycheck Protection Loan Program?

The Paycheck Protection Program (PPP) is a brand-new loan program structured around the SBA’s existing 7(a) loan program and will fund loans to qualifying small businesses.

Who is eligible for the Paycheck Protection Program?

A business, including a qualifying nonprofit organization, is eligible for PPP loans if it (a) meets the applicable North American Industry Classification System (NAICS) Code-based size standard or other applicable 7(a) loan size standard, both alone and together with its affiliates; or (b) has an employee headcount that is lower than the greater of (i) 500 employees or (ii) the employee size standard, if any, under the applicable NAICS Code. Businesses that fall within NAICS Code 72, which applies to accommodations and food services, are also eligible if they employ no more than 500 people per physical location. Sole proprietorships, independent contractors, and self-employed individuals are also eligible. More information on the NAICS-Code-based size standards can be found here.

How do business affiliates affect borrower eligibility for PPP loans?

Applicants typically must include their affiliates when applying size tests to determine eligibility. However, the CARES Act waives the affiliation requirement for the following applicants:
Businesses within NAICS Code 72 with no more than 500 employees;
Franchises with codes assigned by the SBA, as reflected on the SBA franchise registry; and
Businesses that receive financial assistance from one or more small business investment companies (SBIC).Who can make PPP loans?

Who can make PPP loans?

Banks that are currently approved SBA 7(a) lenders and other banks that get approved by the SBA and the Treasury Department to specifically become PPP lenders. PPP lenders will be delegated authority to make and approve PPP loans, with no additional SBA approval required. Search the SBA lender tool.

What underwriting standards will PPP lenders use?

PPP lenders will only be required to consider whether an applicant was in operation on February 15, 2020, and either had employees for whom it paid salaries and payroll taxes or paid independent contractors. Applicants will not be required to demonstrate repayment ability.

What is the maximum loan amount for a PPP loan?

The maximum PPP loan available to any business is 2.5 times the average monthly payroll costs of the business over the year prior to the date of the PPP loan, excluding the prorated portion of any annual compensation above $100,000 for any person. There are some adjustments for seasonal employers and an overall maximum loan amount of $10 million.

How can PPP loan proceeds be used?

  • PPP loan proceeds can be used for:
  • Payroll costs;
  • Group healthcare benefit costs and insurance premiums;
  • Mortgage interest (but not prepayments or principal payments) and rent payments; and Interest on debt that existed as of February 15, 2020.

What is considered a payroll cost for PPP loan purposes?

“Payroll costs” include vacation, parental, family, medical and sick leave; allowances for dismissal or separation; payments for group health care benefits, including insurance premiums; and retirement benefits. Calculations vary slightly for seasonal businesses and businesses that were not in operation between February 15 and June 30, 2019.

Will PPP loans be forgiven?

PPP loans can be forgiven to the extent that the loan proceeds have been used for payroll costs and the following:
Certain utilities, including electricity, gas, water, transportation, and phone and Internet access for service that began before February 15, 2020; and
Additional wages paid to tipped employees.
These costs must be incurred and paid during the eight weeks after the loan is made.
The amount forgiven will be reduced based on failure to maintain the average number of full-time equivalent employees versus the period from either February 15, 2019, through June 30, 2019, or January 1, 2020, through February 29, 2020, as selected by the borrower.
The amount forgiven is also reduced to the extent that compensation for any individual making less than $100,000 per year is reduced by more than 25 percent measured against the most recent full quarter.
Reductions in the number of employees or compensation occurring between February 15, 2020, and 30 days after enactment of the CARES Act will generally be ignored if the action (layoff or salary reduction) is reversed by June 30, 2020.
Forgiven amounts will not be considered cancellation of indebtedness income for federal tax purposes.

What are the primary terms of the PPP loans?

Any amount not forgiven as described above will bear interest at a maximum rate of 4 percent and mature no later than 10 years after the amount of forgiveness is applied.

When will payments begin on PPP loans?

Payments on PPP loans will be deferred for 6 to 12 months.

What are the terms of the deferral on PPP loans?

SBA will issue guidance on the terms of the deferral period.

Do PPP loans have collateral or personal guaranty requirements?

PPP loans have no collateral or personal-guarantee requirements. There will be no recourse to owners of borrowers for nonpayment, except to the extent proceeds are used for an unauthorized purpose.

Are PPP loans guaranteed by the government?

PPP loans are backed by a 100 percent guaranty from SBA.

What fees will have to be paid to the SBA on PPP loans?

The SBA has waived prepayment penalties, guaranty fees and the annual fee applicable to other 7(a) loans.

Client Organizer for Tax Year 2019

Dear Client:

It’s tax season once again and for the past several years it has been our procedure to print a complete tax organizer for all of our current clients. In an effort to be more efficient and to cut down on paper waste, we are suppressing the entire printing for many of our current clientele who preferred just to supply hard copy documentation only. Please contact us if you would like to receive an email with a custom printable pdf or Dropbox copy with your pre-printed prior year data if we prepared your 2018 tax return. The entire blank 2019 Tax Organizer and questionnaire is also available on our website for you to select just the pages you need. Again, please note that filling in an organizer is strictly at your option. However, it may help you organize, collect and summarize your information, and it has been our experience that it helps prevent omissions and allows us to focus attention on your individual requirements.

Please provide us with the following information and attach supporting documentation where necessary:

  •  Copies of all compensation and pension distribution reports – W-2(s), 1099-MISC(s), 1099-R(s), etc. – Form(s) SSA 1099 for Social Security benefits distributions
  • Form(s) 1099 (interest, dividends, etc.) and Form(s) 1099-B from Brokerage Accounts
  • Schedule(s) K-1 (income/loss from partnerships, S corporations, etc.)
  • Form 1095-A, B, or C Health Insurance Coverage
  • Form(s) 1098 (mortgage interest) and real estate property tax statements
  • Closing statements pertaining to real estate transactions (HUD forms)
  • Form(s) 1098-E for student loan interest, Form(s) 1098-T for tuition payments
  • All information regarding educational expenses and fees, scholarships, books, etc.
  • Form(s) 1099-K (Merchant Card and Third Party Network Payments)
  • Purchase agreements, leases, and finance paperwork for all capital equipment, vehicles, etc.
  • All other relevant supporting documents (schedules, bank registers, medical, charitable, etc.)
  • Any tax notices received from the IRS or other taxing authorities

After gathering your tax documents, call the office or e-mail us to arrange for an appointment. We will be accepting appointment dates beginning Monday, January 20, 2020. Please bring all of your documentation, the engagement letter, and this organizer package along with you even if you choose not to fill in any information. In order to expedite the completion of your return by the April 15th filing deadline, plan to supply all information to us by Friday, March 27, 2020.

Thanks very much in advance for your business and we look forward to serving you. Please feel free to call or e-mail if any questions should arise or if you need further assistance.

Sincerely,
Roger E. Coyner
Certified Public Accountant

Client Organizer for Tax Year 2018

Dear Client:
The 2018 Tax Organizer will assist you in collecting and reporting information necessary for us to properly prepare your 2018 income tax return.  If we prepared a 2017 return for you, your prior year data has been pre-printed to assist you as a guide.  Again, please note that filling in the income tax organizer is strictly at your option.  However, it may help you organize, collect and summarize your information, and it has been our experience that it helps prevent omissions and allows us to focus attention on your individual requirements.  We would ask that you assist us by answering the set of questions, and verify that we have accurate information on the client and the dependent information pages.

Please provide us with the following information and attach supporting documentation where necessary:

  • Copies of all compensation and pension distribution reports- W-2(s), 1099-Misc(s), 1099-R(s) , etc.
  • Form(s) SSA 1099 for Social Security benefits distributions
  • Form(s) 1099 (interest, dividends, etc.) and Form(s) 1099-B from Brokerage Accounts
  • Schedule(s) K-1 (income/loss from partnerships, S corporations, etc.)
  • Form 1095-A, B, or C Health Insurance Coverage
  • Form(s) I 098 (mortgage interest) and real estate property tax statements
  • Closing statements pertaining to real estate transactions (HUD forms)
  • Form(s) 1098-E for student loan interest, Form(s) 1098-T for tuition payments
  • All information regarding educational expenses and fees, scholarships, books, etc.
  • Form(s) 1099-K (Merchant Card and Third Party Network Payments)
  • Purchase agreements, leases, and finance paperwork for all capital equipment and vehicle acquisitions
  • All other relevant supporting documents (schedules, checkbook registers, medical, charitable, etc.)
  • Any tax notices received from the IRS or other taxing authorities

After gathering your tax documents, call the office or e-mail us to arrange for an appointment.  We will be accepting appointment dates beginning Monday, January 21 , 2019.  Please bring all of your documentation,
the engagement letter, and this organizer package along with you even if you choose not to fill in any information.  In order to expedite the completion of your return by the April 15th filing deadline, plan to
supply all information to us by Friday, March 29, 2019. 

Thanks very much in advance for your business and we look forward to serving you. Please feel free to contact me if any questions should arise or if you need further assistance.

Client Organizer for Tax Year 2017

Dear Client:
The 2017 Tax Organizer will assist you in collecting and reporting information necessary for us to properly prepare your 2017 income tax return.  If we prepared a 2016 return for you, your prior year data has been
pre-printed to assist you as a guide.  Again, please note that filling in the income tax organizer is strictly at your option.  However, it may help you organize, collect and summarize your information, and it has been
our experience that it helps prevent omissions and allows us to focus attention on your individual requirements.  We would ask that you assist us by answering the set of questions, and verify that we have accurate information on the client and the dependent information pages.  If you desire additional organizer pages for specific types of income or expense – e.g. rentals, self employment, business vehicle usage, etc. please call the office or email us and we’ ll be happy to provide.


Please provide us with the following information and attach supporting documentation where necessary:

  • Copies of all compensation and pension distribution reports- W-2(s), 1099-Misc(s), 1099-R(s) , etc.
  • Form( s) SSA 1099 for Social Security benefits distributions
  • Form( s) 1099 (interest, dividends, etc.)
  • Schedule(s) K-1 (income/loss from partnerships, S corporations, etc.)
  • Form 1095-A (Health Insurance Marketplace Statement)
  • Form 1095-B (Health Coverage) or Form 1095-C (Employer Provided Health Ins Offer & Coverage)
  • Form(s) 1098 (mortgage interest) and real estate property tax statements
  • Brokerage Form(s) 1099-B from stock, bond or other investment transactions
  • Closing statements pertaining to real estate transactions (HUD forms)
  • Form(s) 1 098-E for student loan interest, Form(s) 1098-T for tuition payments
  • All information regarding educational expenses and fees, scholarships, books, etc,
  • Form(s) 1099-K (Merchant Card and Third Party Network Payments)
  • Purchase agreements, invoices, and lease or financing paperwork for all capital equipment and vehicle
    acquisitions
  • All other relevant supporting documents (schedules, checkbook registers, medical, charitable, etc .)
  • Any tax notices received from the IRS or other taxing authorities

After gathering your tax documents, call the office or e-mail us to arrange for an appointment. We will be accepting appointment dates beginning Monday, January 15, 2018.  Please bring all of your documentation, the engagement letter, and this organizer package along with you even if you choose not to fill in any information.  In order to expedite the completion of your return by the April 17th filing deadline, plan to supply all information to us by Friday, March 30, 2018.

Thanks very much in advance for your business and we look forward to serving you.  Please feel free to contact me if any questions should arise or if you need further assistance.

2011 – News on the tax front

I like to keep my clients aware of major tax changes that may be on the horizon.  Below I have outlined some changes which I have gathered from a variety of sources which relate to the Budget Control Act.  For some people these changes will not directly influence them, but for those clients that it does influence we make sure to be aware of the changes and make adjustments as necessary.

Budget Control Act of 2011 signed into law; Future tax changes are left to bipartisan committee

After a bitter partisan battle, on August 2 Congress passed and the President signed into law S. 365, the “Budget Control Act of 2011.” The initial $1 trillion round of deficit reduction over fiscal years 2012 through 2021 doesn’t include revenue hikes, but the second, $1.5 trillion round of deficit reduction over the same years may feature fundamental tax changes as part of the work-product of the bill’s newly established Joint Select Committee on Deficit Reduction (JSC).   So what’s in store for taxpayers, what exactly will the JSC be looking at to achieve these goals, and who is going to be staffing the JSC?

JSC’s Mandate

The JSC’s goal is to reduce the deficit by an additional $1.5 trillion over fiscal years 2012 through 2021, and in finding these savings, its duties are to “provide recommendations and legislative language that will significantly improve the short-term and long-term fiscal imbalance of the Federal Government.” The Administration’s interpretation of the JSC’s mandate is that everything is on the table, including tax reform. Without contesting the point, Republican lawmakers, no doubt looking at the composition of the committee (see below), believe that in the framework of the compromise legislation it will be “impossible” (in House Speaker John Boehner’s words) to use the deal to hike taxes.

Possible Tax Changes

It is hard to say what, if anything, the JSC might recommend by way of tax changes. But looking to past proposals:

… Businesses may have to give up costly tax breaks, such as accelerated depreciation under Code Sec. 168 , the domestic production activities deduction under Code Sec. 199 , and the election under Code Sec. 472 to use the last-in, first-out (LIFO) inventory accounting method. Industries (such as oil and gas) may have to give up some of their tax preferences. In return, corporations may wind up with a modestly lower top rate.  In order to stimulate the economy over the past two years, congress had been increasingly liberal in expanding the capability for businesses to get immediate tax advantages by use of the Code Sec. 179 expensing limits and including leasehold improvements in the qualifying property for the SDA  (50% Special Depreciation Allowance for newly acquired assets). The JSC may have to analyze just how much stimulus has occurred as a result of raising those limits.

… In the international arena, a territorial tax regime may be adopted, there may be a repatriation holiday to induce multinationals to bring home overseas profits, and there may be crackdowns on transfer pricing tax strategies.

… There could be a new round of loophole closers, such as a crackdown on “carried interest.”  Carried interests or “sweetheart deals” are typically prevalent in granting partnership ownership interests in the real estate and the oil & gas industries..

… Individuals may find cutbacks in key tax breaks, such as the mortgage interest deduction, in exchange for flattened and lowered tax rates.

Other issues the JSC will have to deal with include: the post-2012 expiration of the Bush-era income tax cuts (including the current rate schedules, and low tax rates for long-term capital gains); and the expiration of the Bush-era rules for estate and gift taxation, and the transfer tax rules in the 2010 Tax Relief Act, effective for estates of decedents dying, gifts made, or generation-skipping transfers made after Dec. 31, 2012.

In remarks after he signed the Budget Control Act of 2011 into law, President Obama reiterated his call for a balanced plan that includes revenue changes as well as spending cuts. He said that “since you can’t close the deficit with just spending cuts, we’ll need a balanced approach where everything is on the table. Yes, that means making some adjustments to protect health care programs like Medicare so they’re there for future generations. It also means reforming our tax code so that the wealthiest Americans and biggest corporations pay their fair share. And it means getting rid of taxpayer subsidies to oil and gas companies, and tax loopholes that help billionaires pay a lower tax rate than teachers and nurses …. Everyone is going to have to chip in. It’s only fair. That’s the principle I’ll be fighting for during the next phase of this process.”  I’m wondering if that also includes a look at the 50% of the population that pays no income tax at all – including those eligible for the Earned Income Credit, i.e., the “reverse income tax” that became widely popular in the Clinton era and has been hanging on ever since?

In their August 2 press releases about the Budget Control Act of 2011, neither House Speaker Boehner (R-OH) nor Senate Republican Leader Mitch McConnell (R-KY) mentioned the possibility of tax reform as part of the deficit reduction package, but I suspect that’s going to be another hard fought battle.

Statutory Timelines

The Budget Control Act of 2011 carries extremely aggressive targets that Congress and the JSC are supposed to meet. Here’s a summary of what has to be done and when:

  • No later than Aug. 16, 2011 (14 days after the enactment date), the 12 members and the co-chairs of the JSC must be appointed by the majority and minority leaders of the Senate, and the Speaker and minority leader of the House, who each must appoint three members. The Speaker and the majority leader of the Senate must each appoint one member to serve as co-chair from among the JSC members.  As soon as we find out the names, we’ll try to get an update in place.
  • No later than Sept. 16, 2011 (45 days after the enactment date), the JSC is to hold its first meeting.
  • No later than Oct. 14, 2011, House and Senate committees may transmit to the JSC their recommendations for law changes necessary to meet the goal of JSC.
  • No later than Nov. 23, 2011, the JSC must vote on a report containing the findings, conclusions, and recommendations of the committee, as well as the estimates provided by the Congressional Budget Office (CBO), and legislative language in support of those recommendations, which must also contain a statement of the deficit reduction achieved over fiscal years 2012 through 2021. A majority of JSC members must approve the report and accompanying legislative language, and the text of the report and accompanying legislative language must be made public promptly after the vote on adoption of those matters. Any JSC member may file additional, supplemental, or minority views within 3 calendar days if the member provides notice of this intention at the time of final vote on adoption of the report and legislative language.
  • No later than Dec. 2, 2011, if a majority of the JSC approves a report and the legislative language, they must be transmitted to the President, Vice President, the Speaker of the House, and the majority and minority leaders of the House and Senate.
  • No later than Dec. 23, 2011, if the JSC approves a report and legislative language, it must be voted on by both the Senate and the House of Representatives. No amendments will be considered.

Because time is so short, the JSC may lean heavily on earlier tax proposals, such as those made earlier this year by the President’s Fiscal Commission, the Debt Reduction Task Force, or the bipartisan “Gang of Six.”

If the JSC Fails to Approve a Report

If a majority of the JSC members fail to approve a report and legislative language, a sequestration process (i.e., across-the-board reductions) must be implemented, with annual cuts starting in 2013. The cuts will be split 50-50 between defense and domestic spending. Sacred cows might not be spared according to some reports.

The Administration has said that if the JSC doesn’t approve a report, or if Congress fails to pass the JSC’s recommendation, nearly $1 trillion of deficit reduction would be achieved anyway, by letting the Bush-era tax cuts expire at the end of 2012. The threat of a Presidential veto of an extension of the Bush-era tax cuts would, according to the Administration, help force a balanced deficit reduction (i.e., with tax increases and spending cuts) .  If that happens, 2012 is shaping up to be a real circus since the election process will absorb much of our focus.

Tax Planning Implications

In 2010, businesses and individuals weren’t certain what tax rules would apply to them for 2011 and 2012 until December 17, when the 2010 Tax Relief Act was signed into law. That pattern of uncertainty until the very last minute is highly likely to be repeated again this year, making year-end tax planning, and tax planning for a longer horizon, a guessing game at best until at least the end of this year.

If the JSC approves recommendations that include comprehensive tax reform, they are not likely to begin to go into effect until 2013. If that’s the case, Congress will still need to address the host of tax breaks set to expire at the end of this year under current law (such as the Code Sec. 41 research credit, the Code Sec. 51 work opportunity tax credit, and the Code Sec. 222 above-the-line deduction for qualified tuition and related expenses). Also, without yet another “patch,” the higher alternative minimum tax (AMT) exemptions and ability to offset AMT with personal credits will both expire at the end of this year.

If the JSC can’t report out a recommendation, or Congress doesn’t pass it, then the extenders would still have to be dealt with late this year or early the next. And in 2012, there would be yet another bruising battle over the Bush-era tax cuts that are scheduled to expire at the end of 2012 under current law.

Client Organizer for Tax Year 2010

This is the 2010 Client Tax Organizer for Roger Coyner CPA.

My clients are sent a version of this with appropriate information filled out beforehand. This is for the preparation of taxes for the 2010 tax year. Please click on the image get the PDF version of the organizer.

Please contact me with any questions you may have regarding this tax organizer or client questions.

2010 Organizer Blank Form