Paycheck Protection Program Loan Funds Still Available

As of today, there are still PPP loan funds available, as surprised as we all really are. If you have not yet applied for it, there still may be time. Lenders like are still taking applications and helping folks get their funding. Don’t delay, we don’t know how long this will last and it is hard to say if they would do another round of similar funding.

Guidance for Self Employed Taxpayers Filing Schedule C

Many of you that file your business on a Schedule C have been asking us what to do to plan for maximum loan forgiveness for your PPP Loan funds received. Sadly, there hasn’t  been any guidance offered yet by the SBA as to what they would require to prove how you spent the funds intended for you as payroll. Remember, your Schedule C net income is considered your wages, and without a formal payroll, there would be little way to demonstrate this. I reached out to several bank contacts to inquire as to their own experience with the SBA on this matter, and all have said the same thing thus far that they too are in the dark on this.

We are anticipating a very simple process for you in this position. We recommend you keep great records of how you drew funds out to compensate yourself and would at most need to show that you didn’t use the funds to pay non allowable expense per the forgiveness rules.

Businesses That Office at Home (both Schedule C and S Corporations)

The PPP funding allows for up to 25% utilization for rent, utilities, and interest on pre-existing debt obligations. There has been zero guidance thus far for those that work from home and take a portion of their home expenses against their business income. We would love to assume that the business use percentage of your utilities would count, and rent if you don’t own your home. However, this would be a presumption on our part that may not be responsible to share with you as your advisor. As such, without clear guidance, we can recommend that you do not plan to include this in your forgiveness calculation. If the SBA clarifies this soon, we will be sure to update you on that.

Guidance for the Self Employed Taxpayers that file as an S Corporation on form 1120S

For those of you that are single member LLC S Corporations that pay yourself wages and have no other employees, we recommend that you utilize your funds as exclusively for payroll purposes as possible. Assuming that the majority of you have home based businesses (where the lack of guidance noted above applies) you can utilize your funds to pay for Gross Wages, State Unemployment if not maxed out already, payroll processing fees, health insurance premiums, and your employer profit share for your retirement. If you typically fund a SEP or Owners 401K profit share at year end, consider funding the amount for these pay periods covered in your 8 week spending (for proper maximum loan forgiveness) as you pay each payroll period.

By doing this, you will most likely be able to utilize 100% of your PPP funding without going past your payroll and related expenses, leaving no chance that your home office expenses may not be allowable in any part and you would not achieve 100% forgiveness.

Engaging Phocus To Manage your PPP Loan Process

We have had numerous inquiries about our program, and we thank you greatly for that. With our limited time to help considering this programs relatively short duration, it will be impossible to help everyone that has questions about the administration of the program, which is why we are doing our best to utilize these blast messages to get you all the answers to our most frequently asked questions, and support our smaller self employed clients that really do not need to hire us to manage the loan process for them. A little advice now goes a long way to give you the tools you require to make it happen on you own for your far less complicated situations.

For larger businesses with many employees, part of the process in advising you on the loan utilization is to closely track how you are spending your funds and ensure that prior to the completion of the 8 week spending period that you have adhered to the rules the best possible This will ensure that you have a plan BEFORE the end of that period to properly utilize all of these funds, leaving as little to chance as possible. While the reporting may be a difficult endeavor for some business with large staffs of both full time and part time team members (which could result in complex Full Time Equivalent or FTE Calculations) there is more to it than the final reporting. Thought must go into the process of utilizing the funds correctly, and any missteps would need to be corrected prior to the 8 week spending period.

If you plan to engage us after the fact to only help you with your forgiveness reporting, that would be too far beyond the utilization period to be of any real value to help you MANAGE this process, and as such we will be respectfully declining any and all requests to do so. This is the primary reason that we have decided that we cannot offer parts of this process as an A La Carte optional advisory service where you can pick and choose what you would like our assistance with.  We strongly believe that the value is in the entire process from you receiving your loan proceeds, managing your accounting and loan tracking, and preparing your submission to the Lender for forgiveness.

We are here to help if you would like our assistance with this process, just let us know and we can schedule a call to discuss your specific situation and see how we can help you be as successful as possible in administering and forgiving this SBA loan.