Lots of new stuff out today. Let's take a look. We've got a new EZ loan forgiveness application with instructions even, what a concept! One page of info, one page of certifications for the EZ and that's it. Let's go with The Office today.
I think a Schedule C with no employee would fill out line 1 = to the PPP loan, then put the same amount on line 5, 6, 8 and do the certifications. Attach a copy of the 2019 Schedule C and call it a day.
Interesting point here in the certifications but also in the instructions is that for the 24 week period owner-employee PLUS partnership income PLUS the Sch C income the limit is the $20,833. This was hinted at yesterday, but confirmed today.
This EZ Form is available if you meet one of 3 statements. 1-Sch C with no employees. 2 - did not reduce wages by more than 25% for anyone AND did not have a reduction in staff. 3 - did not reduce wages by 25% AND had reduced biz activity due to COVID
Basically it seems like if you avoid the 25% wage red limit AND you avoid the FTE red limit you can use EZ Form. Only limitation that appears on EZ Form is the 60% payroll cost, but let's be real if you avoided the 25% reduction and the FTE you should have plenty of payroll.
I'm lovin this EZ form, let's see if they've improved the full form. Hopefully you are managing everything and using EZ, but for some people the full form is certainly going to be required. I fear it's still going to be lengthy and complex.
So page 1 of the long form has got the FTE and wage reductions with references to Schedule A, so I guess Schedule A lives on. Otherwise similar layout to the EZ form. Certifications are basically the same. I see the EZ has one extra basically proving you qualify for that EZ.
PPP Schedule A - uh oh we've got references to Table 1 and Table 2 from the Schedule A worksheet. Extra info in there about the FTE safe harbor due to reduced business activity, otherwise basically the same as before.
Sch A worksheet Tables 1 and 2 remain the same. Breaking apart the employees who made more than $100k (not subject to wage reduction) and those who made less who would be subject to wages reduction. Safe Harbor 2 lists out 5 steps to figure the FTE reduction calc
All in all the full form is fine. I guess it's not worse, not really better though either. Just updated I'd say. I suppose I should look at the instructions, that's where the fun really is located.
Sch A line 6 instructions say you cannot include employer health insurance contributions made for self employed individual, general partners, or owner-employees of S Corp. That seems new to me. Reason is those are already included in their compensation.
Sch A line 7 instructions says do not include employer retirement contributions made for self employed individual or general partners.
Line 8 instructions describe the state and local taxes, thankfully says in (state unemployment insurance tax) which was the understanding.
Line 8 instructions describe the state and local taxes, thankfully says in (state unemployment insurance tax) which was the understanding.
Sch A line 9 instructions is a big one. If I put a pic then I can't do a gif, so it's saying owner-employees, self employed individuals, general partners are all capped at $20,833 if using 24 week period or 2.5 months of 2019 compensation whichever is lower.
This was hinted at yesterday and it's the same language as in the EZ certifications and the EZ instructions, so at least we are being consistent with it. I think this makes sense, you only got 2.5 months worth of payroll for the owner-employee so don't let them claim more.
Instructions also define the FTE as the 40 hours = 1.0 and taking hours rounding to the nearest tenth. It also is allowing the simplified method of .5 for all part time people.
Salary/Hourly wage reduction is a big new section. A worksheet built right into the instructions to help figure this out. Step 1 uses ave annual salary OR hourly wage during CP compared to same measure for Q1 2020. If .75 or more you're done they are good to go.
Step 2 is wage red SH. Compares the annual salary / hourly wage at 2-15-2020 and as of the earlier of 12-31-2020 or the date the application is submitted. So that's not quite how the law reads, but it's similar. Law says no later than 12-31-20 red is eliminated. This is harsher.
Now it gets into the FTE reduction exception. Nothing new there, but the new guidance now incorporated into the instructions. Far more generous than the original situation.
FTE reduction safe harbor. 1 - if you can document that business activity level reduced through 12-31-2020 from CDC type guidance is the reason for the FTE reduction. This is the new guidance from uhhh two weeks ago? Makes sense so they don't punish a biz that's closed.
FTE reduction safe harbor 2 - if you reduced from Feb 15 to April 26 and you restore them not later than December 31, 2020. This is the exact language of the law, odd that the wage reduction doesn't quite say the same thing in the instructions, but at least the FTE one does.
Schedule A instructions. Goes through the documentation required to be provided with the applications. Seems the same as before, mostly common sense items to prove you spent it on what you said you spent it on. Also docs that you need to have but just keep on your own.
I think this will conclude my PPP writing for the day. I see they also did post the IFR that we secretly read yesterday so that's good. I wonder what's next? Seems like the PPP info is coming fast and furious now. Maybe 30 FAQs to spoil my dinner? #taxtwitter
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