On Friday the Treasury Department issues yet another Interim Final Rule on the PPP. These IFRs offer more in-depth guidance on applying the ever changing rules for this program. The SBA also released two new forgiveness applications in line with the new guidance. A summary of the major changes are below.
Do the math for 8 or 24 weeks
If you applied for the PPP prior to June 4th you can now choose either an 8 week covered period in which you must comply with FTE and wage levels as well as spend all the PPP funds, or a new 24 week period.
The big question here is: did you spend the PPP fully on approved costs in the right ratio by the end of 8 weeks? If so, there is no pressing reason for you to elect the 24 week period.
If not, you may want to choose the extended 24 week period. But keep in mind that would mean you'd have SBA oversight and reporting requirements for a full 6 months. Keeping your FTE count in line as well as your wage levels consistent would be required during that entire time.
If it makes sense overall to choose the 24 week period note that S-corp owner-employees, partners and sole proprietors can now use the PPP for slightly more of their wages, capped at $20833 vs $15385. This is because the SBA will allow you 2.5 months of owner pay at 2019's rates for the longer period vs 8 weeks for the shorter.
June 30th is now Dec 31st...sort of
If you had your eye on June 30th as the date by which you had to raise low FTE counts or wage rates in order to avoid a penalty in the forgiveness calculation you've now got some extra time. You can either raise those levels by Dec 31st or by the date you apply for forgiveness, whichever comes first.
That said, the forgiveness application process will be much easier and faster if you maintain those levels throughout your covered period rather than relying on the "magic moment" of Dec 31st to make the cut.
Forgiveness application deadline & loan deferral extension:
You will need to apply for forgiveness within 10 months following the end of your covered period (the 8 or 24 weeks). If you haven't applied for forgiveness by then you would need to begin making payments on the full amount.
Originally you had to begin making payments within 6 months following the end of your covered period. Now, once you apply for forgiveness you will not be required to make payments on any non-forgiveable portion of the loan until the SBA has given your forgiveness amount to the lender. If you apply near the end of this year it will be well into 2021 before any payments are due.
Need a little extra (temporary) cash?
PPP loan recipients can now also defer the 6.2% Social Security taxes on employee wages. This applies only to the Employer's obligation, not amounts withheld from employee pay. If you choose to defer these tax deposits they will be due as follows:
On December 31, 2021, 50 percent of the deferred amount; and
On December 31, 2022, the remaining amount.
Don't forget to tell AZ Unemployment
In order to qualify for certain exceptions to the FTE threshold you may need to take an extra step. If you have had any employee turn down an offer to return to work at the same rate of pay and same hours they held previously you should make a report of this in writing to the Arizona Department of Economic Security's Unemployment Insurance division and keep a copy for your records. The SBA has yet to put out guidance on exactly how you should make this report, but they require it nonetheless.
"EZ" or full application?
There's another piece of good news. If you have checked all the boxes and complied with all requirements for FTE and wage levels during the entire covered period you may be one of the lucky ones who can use the shorter EZ forgiveness application. The catch is you will still have to do all the background calculations in order to prove you met the various tests. So in reality it is almost the same amount of work to prepare, however it is possible these EZ applications may be fast tracked.
If you are nearing the end of your covered period and have questions on the ever-changing forgiveness process please feel free to reach out.