Payroll Protection Plan

We trust that everyone is safe and well.

Things are starting to clear regarding the options for relief that are available to businesses under the CARES Act. It looks like the key program will be the Payroll Protection Plan (PPP). Under PPP, eligible businesses are entitled to obtain loans from SBA approved lenders for up to 2 1/2 times their average monthly payroll costs.

And the best part is that a portion or all of the loan will be forgiven if you actually spend the funds on qualified costs in the eight weeks following the origination of the loan. Certainly an incentive to keep everyone employed until recovery.

The following qualify as allowable payroll costs:

• Direct payroll (including business owners). Note this is limited to 8,333 per month, per employee
• Employer state & local payroll taxes
• Employee health benefits
• Employer contributions to retirement plans
• Subcontractors – based on 2019 1099’s

Most lending institutions are expected to have this program up and running on April 3, 2020. You can be ready to go when they are by filling out the SBA application by clicking here.

As always, please contact us if you have any questions or require assistance.

Expect that the following documentation will need to be submitted with the application:

1. 2019 IRS Quarterly 941 or annual 940 and 944 payroll tax reports.

2. The last 12 months of Payroll Reports beginning with your last payroll date and going backward 12 months. Payroll report must show the following for the time period above:

Gross wages for each employee, including the officer(s) if paid W-2 wages.
Paid time off for each employee.
Vacation pay for each employee.
Family medical leave pay for each employee.
State and Local taxes assessed on the employee’s compensation for each employee.

3. 1099s for 2019 for independent contractors that would otherwise be an employee of your business. Do NOT include 1099s for services.

4. Documentation showing a total of all health insurance premiums paid by the Company Owner under a group health plan. Include all employees and the company owners.

5. Document the sum of all retirement plan funding (including 401K plans, Simple IRA, SEP IRAs) that was paid by the Company Owner. Do NOT include funding that came from the employees out of their paycheck deferrals. Include all employees, including company owners.

Additional information on the program can be found by clicking here.

Other comments:

Note that because of the probable high volume of activity, the banks will initially be working solely with their existing customers, so your first option should be a bank where you already have a working relationship.

Different rules apply to subcontractors and self-employed individuals. This program should be available to those businesses on April 10, 2020.

Repayment terms on amounts not forgiven are generous, with interest rates ranging from 0 to 4%, and up to 10 years for repayment.