PPP Forgiveness Details

November 8, 2023

**Please note that this video was recorded prior to the changes in the PPP Flexibility Act was passed on June 5, 2020

Video Transcription

Good afternoon everybody. I am Donna Bordeaux. I’ll be your host today. We are going to be talking about PPP loan forgiveness, so I hope you will enjoy us today. Your session is going to involve some Q&A, but that will mostly be involved at the end. If you have questions throughout our presentation today, I urge you to post those in the chat from zoom and I will follow those through at the end of the meeting or I’ll try to grab some throughout our session today depending on when they fit in the best. So again, I am Donna Bordeaux. I’m with calculated moves. We are also Campground Accounting and PYOP Accounting thank you for joining us today. Our session will be about an hour. I will tighten it up as we need to, but as we go through, I’m sure you will find there’ll be some questions that come about.

So I want to make sure that we are able to get all of those included in our presentation today. Now you will find throughout our presentation that some of your questions may not have answers yet. I normally deal in a lot of factual information where I can provide answers, but this is a moving target and there may be some things that we just don’t know the answer to yet, so that makes it all the more important to follow this throughout its process. So again, if you have questions throughout, please enter those in the zoom chat and I will do my best to take care of all those. If there are any that I miss, I will go back and review them after we get started or after we finish up today. All right, so let’s start off. First of all, with a little poll, the PPP is the paycheck protection program and I’d like to know how many of you have received a PPP loan to date. So if you would answer that question for me on your screen. I am just curious how many of you have received versus are still waiting on the poll.

All right, give it just another second and we will end that. All right, wonderful. So it looks like about 90% of the people on our call today have already received their PPP loan. If you have not, I will share with you that I think things are slowing down quite a bit through the SBA and they’ve caught up. You may not have received your funding, but I believe everything is flowing through the SBA pretty quickly right now. And if you have not already applied, I urge you to do so soon as we do expect the funding to run out again. But it may not be an abrupt halt to the funding like it was on the first go-round because the loan amounts now are much smaller than the million-dollar loans everyone has seen about in paper. All right, so let me end that poll here on my side.

All right, so let’s talk a little bit about what expenses can be forgiven through the PPP loan program. Now PPP in its nature was designed to help you process payroll. So the first and biggest expense category in there are payroll costs. When we looked at payroll costs in the application process, it included much more than just gross payroll. It also includes the cost of employer taxes, like state unemployment taxes. It will include the cost of group health care benefits that an employer pays for its employees as well as retirement matches provided by the employer. So all of those costs roll together to combine into the term that we call payroll cost. If you own a property like a building that you operate out of or a piece of property that is utilized for your business, you can also deduct mortgage interest. Keep in mind that is just the portion of the payment that is interest and not the entire payment.

If you’re renting, you may rent, use your rent as a forgiven expense. Now, this rent we haven’t really received a lot of clarification, but I think the intent is that this is a building or a rental space that you use and not equipment rent or you know, if you’re renting a U-Haul Truck to tow things around or make deliveries, that kind of rent is separate. I believe so far. So to be safe, I would exclude that part and only count rent of property that you use in business. You can also include the utilities, things like electric, gas, water, sewer, telephone as well as internet. So please don’t forget the internet in there. Those are the expenses that are eligible for forgiveness. That doesn’t mean that those are the only expenses that the money will be used on. And we’ll talk about that in a few moments.

Alright, what do you need to do for the forgiveness process? First off, you will need to keep your documentation up to date. The cares act where the PPP loan originated requires that your lender look at documentation to determine your forgiveness. Now, documentation includes copies of bills, payments, like canceled checks or bank statements showing the payments were made. And of course, for payroll, we would be looking at payroll reports. I suggest strongly that you keep a listing or a spreadsheet to keep up with all of your expenditures throughout this entire process. For our clients, we have developed some specialized spreadsheets to help them keep up with the expenses as they occurred and also to project out things like labor costs that will be utilized and what percentage of the loan will be forgiven or become a repayment. We’ll talk about that in a moment, but I strongly suggest that you keep all of your documentation in a pristine manner throughout this process.

The forgiveness plan will most likely have to be finalized in the latter part of your eight week covered period. The covered period is important. That is when the expenses can be incurred or paid. The eight week period right now starts on the day that you received funding for your loan, so the day that deposit hits the bank is the beginning of the next eight week period or 56 days where the expenses will be includable in your PPP forgiveness. Now, because this forgiveness plan has so many open questions, I think you’re going to have to continually monitor it throughout all eight weeks and you’re going to have to kind of finalize your plan during those last weeks. Maybe weeks five through seven. Make sure that your payroll is on track and that your bills are paid in that perfect timeframe. The last thing that you want to do is make sure that all of those timing issues can be eliminated and you’re not paying your payroll one day after your eight week period ended.

You’ll want to make sure that you’re planning those dates in detailed fashion to make sure they fit in that eight week period. Right now we highly suggest that you ask your banker about what their requirements will be for forgiveness. Just like in the application process, your bank will be the determining factor as to how the first step of your forgiveness process goes. In the application process, we saw different banks using different formulas, different worksheets, different ways of tracking the information as well as different documentation requirements. We expect the forgiveness process to be just like that. Where different banks are going to use different things and different processes. So I suggest you ask your banker now and probably again several more times before this process is done, what they were required for forgiveness at this very moment. I doubt that you will find many bankers who have a clue what they will require for forgiveness. We’ll talk about this more, but there were so many unanswered questions right now that I think they’re still worried about getting the loans out rather than about the forgiveness process.

I also had a question that came in on the back on the utilities about trash removal. That is unclear, but at this time it is not specified that trash removal would count in the utilities. We’ll have to wait and see. That’s a good question. All right. Let’s talk a little bit about how the forgiveness percentage is determined. There are two aspects of the forgiveness that are very important. The first is paying the actual expenses. The second part has to do with the forgiveness percentage and that is the part about re-employing or employing people a full time equivalent to in your business. There are a couple of base period measurements that have to be used for the forgiveness. First off, you’ll see these two listed here full-time equivalence, lower up the last year of these two date ranges. February 15th of 19 to 6/30 of 19 is one of the periods.

And the second period of testing is the average full-time equivalence from January 1st of 20 to 2/29 of 20 so the month of January and February. So if we look back and let’s say in last year of the period 2/15 to 6/30 of 2019 you had six full-time equivalents in your business and this year between January and February you had three full-time equivalents. That means that the calculation would be based off the lesser of those two numbers or three full-time equivalent. That’s how many you would need to have at the end of this loan period in order for your forgiveness to be deemed at 100% of the forgiven costs. Okay. So the percentage of forgiveness then that you will use to compare that with is the average full-time equivalence for the eight weeks after the funding, what we call the covered period. So if your loan was funded on April 15th, I don’t have the exact dates in front of me, but somehow that’s going to run into about June. So between that eight week period starting April 15th and you get to the end, if you were average full-time equivalent, we’re two, and you had the base number that we described in that original period of three, that means that 67% of your loan would be able to be forgiven.

Now there’s also a little clause, it’s very confusing. It also says that if you restore your full-time equivalents by June 30th, so without regard to this eight week covered period, but if you resume and get your full-time equivalents back by June 30th, then you get a hundred percent forgiveness. Now, this is a bit of a sticky issue. It’s not worded really particularly detailed in the law. But that’s what it says so far. We’ll talk about how this could be subject to some change. But those are the two criteria in the law right now that you have the average full-time equivalents for the eight weeks covered period after or that you restore your full-time equivalence back to June 30th.

Now you do not have to have the same employees that you had before. So there’s been a lot of concern because a lot of companies have furloughed their workers, put them out there, they’re on unemployment right now and maybe they won’t come back or they don’t want to come back or they have underlying health issues that they cannot come back or your location may not be able to open yet your employees for the full-time equivalent do not have to be the same people. What matters is the number of full-time equivalents. Now let’s talk about what a full-time equivalent is, all right? Here’s where all the questions come in. We don’t know. The law does not state what counts as a full-time equivalent. It does not tell us how we count the average. It makes no reference to the calculation of how we get to the full-time equivalent.

There has been some speculation that we go back to the law that was used with the affordable care act where we had a similar problem of determining full-time equivalents. And in that law, they use 30 hours as equivalent, as a full-time equivalent. The department of labor does not define what a full-time equivalent is. It leaves that to employers to define. So in some businesses a full-time equivalent, maybe 40 hours others, it maybe 30, 30 to 35, whatever it may be. They leave that definition wide open. So we’re going to have to wait for some further clarification and guidance to really know how that formula is going to work.

Next, let’s say that you have that problem where you cannot recall the same employees and you need them, employees, to make it through this calculation. Remember that we have some ability to hire family members. We may also be able to pull in a minimum wage employee to replace an employee that made more. We don’t necessarily have to replace them with a light kind or the same position. So right now get creative and think a little bit more in planning out your labor structure, especially for those who are not able to open yet or have some limitations on pulling their workers back in yet you may be able to hire some family members, spouses, parents, children, and pull them onto the payroll at least on a temporary basis. Also, when I talk about minimum wage employees, remember that although some employees may not want to come back, there are a lot of people out there who would be thrilled to have a job working minimum wage, and I will mention this, there are a lot of college students and high school students who are not in school full time right now.

They would kill to have a job and some extra money and minimum wage to them is still a gold mine. So think about some creative structures that you can use to make your full-time equivalence work. And lastly, a lot of focus has been placed on 100% forgiveness and getting this money as a tax-free, a source of income that you don’t have to pay taxes on and that you get forgiven and you don’t have to repay it. I would much rather you take a loan and use it for a worthwhile purpose and pay it back then to just pay someone who is useless to you from a labor standpoint just to get rid of the money that does not help you in any way, shape or form. So it may be to the business’s best interest that you use some of this money as a loan and not expect or want forgiveness.

So I’ll give you a little example. I have a business owner who normally has 30 full-time equivalents. They are not able to open their location currently and they’re struggling to have three full-time equivalents now rather than 30 I don’t expect to want them to go hire 27 high schoolers and throw them on minimum wage just to pay out the money that will not serve any purpose for the business. Nor do I want them to pay their employees to sit at home and watch Netflix. So in their case, we talk about this as the decision-making process that we would with any other money they have. When you earn money, you should make a decision on the worthwhile spending of that money to make sure that it is doing some good for you, that it has a return on investment and that it’s not just being thrown away.

I would look at the PPP funds the same way. All right. Okay, I did have a couple of questions, but I think I’ve answered them. How do we determine what an FTE is and how do we calculate it? We don’t know. I wish I had a better answer for you. We are awaiting guides and I will tell you that Congress and Senate are putting a lot of pressure on their fellow constituents as well as the members of the treasury and the SBA to provide us with guidance on how this is going to work.

So again, we have a lot of unanswered questions. I’m going to give you a few of them. I hope not to confuse you here, but I want you to know that this is an ever-changing process. Just like when they announced the PPP program on March 27th when the cares act passed, we have had nothing but changes and questions. These changes like the weather, so there will be a lot more information that you’ll need before the forgiveness process is complete. A couple of other questions we don’t know that you should be aware of. First, the law, the cares act says that these expenses shall be incurred and paid during the eight week covered period. Incurred and paid is a loaded question. When we did a little deeper, let’s say it’s rent, for example, the red bill lasts the whole month. If we talk about when it was incurred, is it only the portion that is incurred from the dates from the date it was funded through the eight week period, or is it the fact that you paid your monthly rent and that covered the whole month within the eight week covered period?

We don’t know. We’re waiting for further clarification. Also with payroll you know, there’s often a two week lag on a payroll where the pay period ends one week and it doesn’t get paid until the following week. Where does the cutoff occur? We don’t know that yet. So we’re waiting for further guidance, attempting to recall workers. There’s been a lot of talks mostly in the media, and I’ll be honest, I haven’t seen this in real life yet about attempting to recall workers and workers are making so much more money on unemployment right now that some don’t feel the need to get off the couch and go back to work. They feel there’s an easier paycheck waiting for them at home right now. If depending on your state if workers are making less than about $24 an hour, unemployment will pay them better than you will.

So there’s been talk of many employees who do not want to come back to work because there’s an easier paycheck at home sitting on the couch. If you cannot get those same workers back, the treasury department just issued guidance yesterday, I’m sorry, Sunday for a little bit of attempting piece, but it added more confusion. They said that if you cannot get those workers back, they will not count that against you in the PPP forgiveness. But they also said that you should be notifying the unemployment office because they will in effect be, for denied unemployment if they had a job waiting for them and they wouldn’t go back. So they would be in effect forfeiting their unemployment benefits. Now, logistically, this sounds like a nightmare to me. I do suggest that if you recall your workers, you require every single one of them to have a written document that they receive that says, I am calling you back to work on whatever date it is.

You will be on the schedule for whatever timeframe. You should have documentation of your attempt to call workers back. And if they do not return you will need to check with your individual state. But it sounds as if you need to be reporting that to the unemployment office for your state. All right. What documentation will the banks require? As we talked about before, it will be different by every bank’s standards. So ask your bank said, we don’t know. Also, the SBA has not issued specific guidance on that as well to the banks to let them know what they should be looking at. Next, another big mess will the expenses be deductible to make this truly tax free? Alright. You’ve all heard in the news that they say PPP loans are not taxable when they’re forgiven. That is true. However, if you spent the money, let’s say for a moment, did you spend a hundred percent of your PPP loan on payroll?

The IRS and tax code says that if somebody reimburses you for an expense, you can’t deduct it also. So that would mean that the amount of the payroll that you spent that money for, that you use PPP funds for will not be deductible. That in effect means that the PPP loan proceeds were taxable. The IRS just released their notice last Friday. That is notice 2020-32 if you’d love to read that or need some sleeping material tonight. You can look at that notice and it is saying that based on previous court law, a tax law for other cases like this, they’ve already said this cannot be deducted if it’s already being reimbursed by some other form of a grant. So there is a lot of confusion generated by this and I don’t think this is the last you’ll hear of this. Congress and Senate were very surprised by this, which they shouldn’t have been.

We’ve asked that question since the start. And kind of knew that was an underlying issue that would rear its ugly head at some point. So we’re waiting for further guidance on that. I wouldn’t jump to any conclusions on that one just yet. Also, we’ve all heard the story of somebody who says, well, geez, I don’t want to win the lotto because I’d have to pay them a lot of taxes. Yeah, well that’s not the case. You’re never going to pay more in taxes than you receive, so please don’t let that deter you from taking the PPP money and putting that money to good use another unanswered question. State law, the States don’t necessarily always follow the fence so the States might have different rules for the tax-free part of this. They may have different rules on how this affects you from a tax perspective.

The last great unknown we have is if you were self-employed filing a Schedule C as a sole proprietor or if you are a partnership where you receive a K-1 and pay taxes on your self-employment income. The method for forgiveness on this one has not been defined yet, so we’ll have to wait and see. There’s not a formal process to take a paycheck when you are self-employed. So there is no documentation of how that money is being used and we’re waiting for further guidance so that one is just out there. Probably it’s going to come down to something. You have to certify back to the bank and do something on your tax return with it. We also don’t know how that one would apply to the expenses being deductible issue that we dealt with in the IRS notice 2020-32 so lots of unanswered questions there.

What other changes could we see? There is also a lot of rumbling about how this process should have been handled from the start and some things that they wished they would have done differently. We’re hearing a lot of changes rumbling. Nothing final yet, but a couple of issues that we’re seeing out there on the horizon, the timeframe that June 30th magical date when they passed this law on March 27th to June 30th seemed a long way away. Well, we’re now in the beginning of May and that is next month for some people who are just getting the funding for their PPP loans or may not have even applied yet, that alternate date where they thought all of these would be done by June 30th is not giving enough timeframe. That eight week period we’ll go further than restoring employees by June 30th so there’s a lot of open-ended questions there.

Will they change that June 30th date? The other big question is there’s a restaurant group in Philadelphia who has posed a lot of open questions here. They said we’re a restaurant who employs a hundred people. We cannot open up a restaurant yet and we cannot open to full capacity anywhere near June 30th even in the best of conditions. So there’s no possible way that we can restore our employees by June 30th so there and they can reduce their labor, but they can’t reduce their rent. The treasury department came out after the PPP program was put into play and said, you must spend at least 75% of your PPP money on payroll costs. The maximum you can use for rent and utilities was 25% now this is not part of the law. This was part of what the treasury department guidance wants. I think we’re going to see a change with that.

Those restaurants pose a great case to say we can’t reduce our rent. We can reduce some of our payroll costs. So extending the timeframe or removing or changing net 25 and 75% split. I think we may see some movement on that. The other question is that eight week covered period, the start date is the start of funding of your loan. Well, for those businesses who can’t even reopen yet, this poses a great problem. We have people who got these in mid-April that still can’t open. How in the world are they going to be expected to restore their employee count? When they can’t even open their business. The restaurants post this same question. The AI CPA as well as others has asked and recommended to the treasury department that that eight week period should not start. I tell you, they can legally reopen their business. So that is another thing on the horizon that we may see some movement or changes with.

And lastly, that tax deduction for the expenses that thus making PPP funds taxable by not being able to deduct the expenses. I think we’re going to see some movement on that. Alright, so I’m going to answer a few questions here in just a moment, but I want to share one other thought with you. We work with business owners all across the country and I am seeing some results where people are working with, with their partners, their accountants, their CPAs and they are not receiving these answers that I am providing to you today. I challenge you to rethink if that is your situation. I don’t want you to ever miss out on important things like the EIDL, like the PPP and there are tax planning steps as you’re probably missing every single day if you don’t work with a proactive CPA like we were doing, so I offered to you please, if this is a situation where you are not receiving this information from your advisors, please think about how you should be moving forward with your business and changes you may want to make.

If this is something that you’re interested in talking about, I’m not a high-pressure salesperson here. I just want to help you make the best decision for your business and I’m here to help you. If you’d like to schedule a time to chat, please just go through our website at calculatedmoves.com/meet and you’ll see my schedule online and you can schedule an appointment at your leisure. We have helped our clients get over half a million dollars so far and EIDL and PPP funding because we are proactively helping them get to send this information early so they can react and making sure that they get everything they deserve in the funding side. So if that helps you, I would be happy to talk with you about how we can help you. Let me take a few questions from our chat here and see if we can help with some others too.

All right. What if the property mortgage is in your personal name but use for business? Do you use the mortgage interest as forgiveness? If that piece of property is your personal residence? Like you have a home office or is on your personal residence lot that’s probably going to be a no, but that’s be an individual case. We’d have to ask the bank, but the many people have rent that is paid through a different entity or have a separate entity owning property. So the name on that property probably doesn’t make much of a difference. But if you were doing that, the safest thing I would do is to write a business check back to you personally for the rent on that property each month. So for it, okay, you need to make sure you clarify that and you track it properly for your taxes as well.

But there may be some better things for you to do with it also and get it out of your personal name so that you don’t have as much risk along with that property. So those aren’t part of the PPP, but some other outside tips there. Another question, so to clarify our part-time employees not included, no part-time employees are included. So you have to look at the number of hours, and again, I’ll preface this by saying we don’t know how they’re going to calculate this. Well, my guess would be if you have a full-time equivalent is 30 hours. For example, and you have two people each work 15 hours a week could gather combined. They are one full-time equivalent, so in a very simplified situation and probably they won’t do it as simple as we’d like. You would take the number of hours work divided by 30 and come up with a full-time equivalence. We don’t have any advice on how that calculation works yet, so I’m completely speculating there, but part-time employees will count. We’re just not sure how the formula will work.

All right. If you don’t spend 100% is the portion forgivable or is it the entire amount of no, it is a proportion. Again, if we go back to this forgiveness percentage, let’s let me give you around, a very round number example. Let’s say that you have a $100,000 loan, which is higher than most people have, but I want to use a nice round number. You have spent $75,000 on payroll and $25,000 on rent, so you have spent 100% of the money. When we look at your full-time equivalents. If you have two full-time equivalents and you’re supposed to have had four based on those other timeframe periods, two divided by four is 50% so 50% of the loan could be forgiven. Okay, so $50,000 would be forgiven. The other $50,000 would be would need to be paid back. The payback is at 1% interest and it is paid back over the following 18 months. So the loan process is a two-year process. Well, for the first six months there are no payments. So the payment would be over the last 18 months at 1% interest. So again, a nice low-interest rate. So take advantage of that.

Okay. we had a question about covering the EIDL. We will not be covering the EIDL, but I do want to mention one big important thing throughout this entire process. These are very confusing. I get that. EIDL, PPP, we’re just throwing acronyms everywhere. I’m seeing a lot of people confuse the terminology, the types of loans, the factors of what they could be used for, how the forgiveness works. Let me just clarify. EIDL is an entirely different program. The EIDL program so far for most people is specifically a grant that they received. It’s in $1,000 increments based on full-time employees up to $10,000. You do not have to repay that money, period. You do not have to repay it. It has no effect on your PPP loan. Initially, there was a part of the application for the PPP that had you subtract the EIDL and it looked like they were making you take the grant money back off.

That application was revised and you only had to subtract the EIDL if it occurred before April 3rd of 2020, which was virtually no one. The only people who had any ideals were people who had catastrophic losses from other things besides COVID that may have already been in place. So I gonna say it again, cause I’ve typed this into so many comments on Facebook posts so far. The EIDL grant does not have anything to do with your PPP loan. You do not have to pay it back and you do not have to subtract it from your proceeds from the PPP. Okay. So I hope that clarifies it. I hope I never have to say it again, but I will.

What if I just got the EIDL loan too? I didn’t think they were sending both. Alright, let’s talk. Let’s clarify one more thing. The EIDL grant, it was up to $10,000. The EIDL loans are still coming, but I have seen one in the entire country so far. So I highly doubt anyone here on this call today has received any EIDL loan, not the grant, but the loan. If you have, please tell me in the chat that you have that I have some questions. We’re trying to learn more about the process and the timing of this. So the EIDL loan is not $10,000, it’s probably going to be more and you will sign loan documents to get an EIDL loan. You did not sign any documents except the initial application electronically to get the EIDL grant. Okay.

Alright, so EIDL okay. My bank said they were counting employees, not hours. Can they decide to do that? No, this is a law. They can say that right now because nobody knows how to count employees or hours or any of that. The criteria for forgiveness on that has not yet been provided to us. During the first six months of the PPP, is there interest? Yes, there is, but it’s at 1%. So if we, I mean that’s such a small, small amount. We’re talking probably less than a hundred dollars for most folks, so I wouldn’t be concerned about that at all. Okay. Least of your worries. I saw something about employee salaries can not be reduced by more than 25% yes, that is true. If you reduce an employee salary or hourly rate, most of this is concerning hourly rate for most people, more than 25% that you have to, you have to restore that to get it to count in the forgiveness. So you can’t take your $125,000 sales manager and all of a sudden pay a minimum wage to get them count as an FTE. Okay. However, if he doesn’t come back to work and you don’t put him on the payroll but you replace him with somebody else in a different position, that does appear to count right now. So I don’t know exactly how that’s going to fit into the final numbers as yet.

Okay. My contact at the bank, so they were counting employees I had on February 15th, not ours. Yes, but the question is, it’s the full-time equivalence so we still don’t know how to count that, for either of these periods yet. We didn’t know how to count it at the time of application and we don’t know yet. That is still to be determined. Okay. I wish I had better answers for you on that, but we just don’t know yet. We’re waiting for guidance. I, my bet would be within the next two weeks you’ll see some further clarification and guidance.

Do you know if the additional funds are still being given out on the EIDL grant, the up to $10,000? What I know about the funding let’s back up one step in round one of the cares act, there was $10 billion allocated for the ideal emergency grant. That’s up to $10,000. They used up all that money ran out, they had a lot of applications very quickly. They’ve since taken the application down. You can no longer apply. However, in round two where we had additional funding approved a week and a half ago now, they added another $10 billion. So we have seen them trickling in. I haven’t noticed anybody saying they got any this week. So but last week we did see people saying that. So I’m not sure if they’re still coming this week. But the EIDL money, there was more money put in the pot for those emergency grants. So they did take from the additional applications that didn’t make the first cut and set some more out for my understanding.

I will tell you there was an email that was received by everyone who put in the EIDL application on Sunday night and it said again that your application is being processed. Watch for an email. Now there’s a lot of concern about spam and poor emails. I will tell you, you should watch your emails from any email that you get from disaster customer service@sba.gov that’s the official email that is coming out from them. The next step on the EIDL if you were to receive a loan, not a grant, but a loan will be that you will receive that email and it will ask you to set up a portal where you will enter further information and have a login.

All right. Would email correspondence be sufficient documentation to call employees back or does it need to be snail mail? We don’t know. We don’t know what the requirement is. So I would suggest strongly that you do snail mail. I would suggest certified mail because that’s the only thing that will give you proof that you actually sent it. Okay, another question. So to clarify, if not open yet and just receive the PPP in my account yesterday, can I wait until we’re open before bringing my employees back? Or at least wait a week or two? Yes. I do not recommend calling back employees if you have nothing for them to do. Now, I do, Molly, that everybody out there has work that their employees could do. Even from home. You just have to get a little creative. Every one of you needs marketing. Your employees can help with that.

Every one of you needs to document processes and procedures. You may need other things done that people could do from a distance. So if you have those cases, again, don’t spend, don’t spend this money unwisely, but if you have work that employees can do that needs to be done, that will give you a return on your investment, please have them do it. Okay? But yes, you can wait. Most of these criteria, you have eight weeks to get your plan in place and start calling employees back. My question is, would you rather burn $500 this week because you paid employees to sit at home on the couch or have that money in your account that you have to pay back? One day? I’ll take the payback any day of the week. Okay, I do have a comment here that somebody says they received the EIDL grant, not loan grant today. So apparently those are still trickling out. Okay. Is the 75/25% split on the forgiven amount or the full loan amount? I’m seeing some weird stuff about that, but from everything I have read, it’s on the full loan amount. Okay.

Another good question. Can I employ myself as an employee? Well, that depends. Depends on how you are structured as a business entity. If you are a sole proprietor or a partnership, the answer is no. If you are an S Corp or a C Corp, you should already be on payroll. So the answer is yes. Okay. So your employees a status should not have changed from the time that you applied to before that until now. If you were on the payroll before, you should be on the payroll now. If you were not on the payroll before, you should not be there now. Okay? somebody asked about an LLC. An LLC is a legal form of operating a business. It does not tell us anything about how you are taxed. If you are taxed as a sole proprietor or a schedule C filer or as a partnership, you should not be an employee. If you are an owner, if you are taxed as an S Corp or a C Corp, you should be on the payroll.

Can you add bonus money to employee checks and it’d be forgiven? Yes. However, I challenge you to think about, well, the reasoning, I make sure that it makes good sense. If this was not a PPP loan, would you be bonusing your employees right now? If that answer is yes, then sure, go ahead. It still counts as payroll because it’s compensation, but do not attempt to burn through the money just to get it forgiven. That doesn’t give you anything. It’s a net zero zero result. Somebody indicates they’re an LLC and they take a draw. A draw is for a sole proprietor or a partnership. So you should not be an employee. Okay. All right, I’ll give you a moment here if you’ve got any other questions. I’m going to read back through one more time and make sure that I’ve not missed anything. I think we’re nearing the end.

All right. I think we’ve covered everything that we have here. All right. Oh, I got a couple more coming. Okay. Our PPP application only included the payroll amounts and did not include our owner’s draws. We were an LLC, schedule C. So our loan did not include our draw. You need to go back and talk to your bank. In the initial process on April 3rd when they started taking PPP loans. The SBA is not real clear because they said on that application that independent contractors and or I’m sorry that sole proprietors could file on that date, but then they said on April 10th if you receive a 1099 or you’re an independent contractor or self-employed that you needed to wait until April 10th they apparently don’t understand those are all the same thing as sole proprietor is the same as a self-employed person.

So they allowed sole proprietors and on that first week but did not account at all for their final bottom line earnings that went to the owner when the process was redefined supposed to be on April 10th but it actually didn’t open up until the following Monday. Most banks they added in a portion where you gave them your schedule C and they gave you self-employment earnings as well. Now all of this was supposed to be under one loan but I have dealt with several of these and they’re coming in with multiple loans. So the best advice I can give you is to go back to your bank and see if they will allow you to reapply for that second portion that should have been for your sole proprietor Schedule C, that’s the only option that we have at this point. They may allow you to do that. I will tell you that from what we are seeing, it appears that there is still PPP money available if you’ve already applied the SBA. I think the big rush from all the banks has pretty much flowed through that process. So we’re seeing a slower version now and you should be able to get through pretty quickly and easily depending on your bank.

Yeah. Let’s see. Somebody asked about what I said about family members and minimum wage here. That part of it was about the fact that if you need to get more FTEs, more full-time equivalents, you may be able to employ family members, spouses, children, parents, or higher high school and college students at minimum wage to fulfill that requirement. Why is it different to hire a family member instead of ourselves as an employee? If we’re an S-Corp, it isn’t. If you’re an S-Corp, you should be an employee. Okay. Again, with my bank who said the employees don’t count or the employees count, not the hours I included my draws an owner and counting that alone. I am not sure about that one. Again, that sounds a little odd, but I can tell you that there are no rules yet that your bank could be relying on to tell you to count the employees, not the hours.

There’s no rules for anybody and the SBA will be the final process to decide who gets their loan forgiven. Let me describe that final process for you for a moment. When you apply to your bank for forgiveness, you will give them all the documentation. At that point, there will probably be some sort of form, whether that’s the same or different. By bank, you will apply for forgiveness. Your banker will review the information, the bank. Then if they say that everything looks good, has to submit information to the SBA. The SBA will then give the bank the money to repay your loan. So everything will ultimately still have to go through the SBA. So it’s not a bank by bank decision yet as to what will count. Okay. So they’re going to have to wait on the SBA to give them or the treasury department to give them guidance.

Let’s see. Okay, so when I applied for my PPP originally it was two and a half months of business expenses, but when I got my loan it was actually two and a half, 2.5 of the average payroll in February. So the law went down. Are you able to reapply? No, you’re not. Once you have a PPP loan, it’s yours to keep until the time that you forgive it unless you repay it. So you can’t have more than one PPP loan. I will say the exception to that is what the sole proprietor in the partnership because I’ve seen it happen.

All right. I think that finishes us off. If you have other questions that come about in your PPP loan, we also have a package available to you to describe the process and to describe the forgiveness for as much as we know now. I will be doing followup sessions as we get more information, so please watch out there. Also, if you will sign up through our websites to be a subscriber, we’ll notify you when we have those websites or webinars coming up. We also have a page on each of our websites for Coronavirus resources that we try to keep updated with the latest and greatest information. All right. I’ll stick on here for just another minute, but if you have to run, I will see you soon.

Donna Bordeaux, CPA with PYOPAccounting.com.

Creativity and CPAs don’t generally go together. Most people think of CPAs as nerdy accountants who can’t talk with people. Well, it’s time to break that stereotype. Lively, friendly, and knowledgeable can be a part of your relationship with your CPA as demonstrated by Donna Bordeaux and PYOP Accounting.com. Donna and her husband, Chad, who is also a CPA, have over 50 years of combined experience as entrepreneurial CPAs. They’ve owned businesses and helped business owners exceed their wildest dreams. They have been able to help PYOP studios earn 4 times more profit than the average PYOP and are passionate about helping industries that help families build great memories.