Updated: Oct 5, 2020
The CARES act was approved last Friday, and it has been a marathon of reading the bill, interpreting the bill, reviewing guidance from the SBA, US Chamber of Commerce, Treasury, and thought leadership pieces from every accountant, attorney and banker in the United States. And it's only Wednesday!!
As a small business owner, I have focused my efforts on the Paycheck Protection Program or PPP and wrote an extensive overview of the program and its implications earlier this week in my article entitled The Paycheck Protection Program Explained by a Fellow Small Business Owner.
It appears that small businesses will be able to start making application on Friday, April 3rd. The SBA has released a draft application and the Treasury has issued additional guidance. I would not waste a lot of time completing the SBA's draft application as many of the banks that are offering the PPP loans will likely have their own applications. However, the draft application will provide guidance.
In the interim, I would spend some time getting familiar with your payroll processing software. 90% of the information that you need to make application is housed here. We use Paylocity and once you get comfortable with the user interface it is really intuitive.
In order to process your PPP application the bank is going to ask you to provide
2019 IRS Quarterly 940, 941 or 944 payroll tax reports
Last 12 months of Payroll Reports beginning with your last payroll date and going backwards 12 months (e.g. gross wages for each employee, paid time off for each employee, vacation pay for each employee)
1099s for 2019 for independent contractors that would otherwise be an employee of your business
Documentation showing total of all health insurance premiums paid by the Company Owner under a group health plan
Document the sum of all retirement plan funding that was paid by the Company Owner (do not include funding that came from the employee’s out of their paycheck deferrals)
If you are a Paylocity user, all of this information can be found in 2 reports. The last 12 months payroll, health insurance and retirement funding can be found in the Payroll Register Summary under Reports and Analytics > Reporting
Search for the report entitled Payroll Register Summary
Select Payroll Register Summary and pay special attention to process date from and process date to. Per the PPP I believe that you have 2 options. 1) Your payroll for calendar year 2019 or 2) your payroll for the trailing 12. If you have not hired or fired either option will do. If your team has grown over the trailing 12 you will likely want to select that option. Additionally, make sure you select active for employee status so your output includes only the salaries, vacation benefits, healthcare, retirement benefits and state and local taxes for your current employees.
Scroll to the bottom and select Save and Run
Then access the completed report from the report pickup tab
Your PDF is now ready with the salaries, vacation benefits, healthcare, retirement benefits and state and local taxes for your current employees.
In order to determine the amount of PPP funds that you are eligible for simply add the 3 columns above / 12 months to obtain the average and then multiply by 2.5.
The 2019 IRS Quarterly 940, 941 or 944 payroll tax reports and 1099s can be accessed by clicking on Reports & Analytics >Quarter and Year End. The Quarter End reports and 1099s are available per the screenshot below
The formal application process should open on Starting April 3, 2020 for small businesses and sole proprietorships and April 10, 2020 for independent contractors and self-employed individuals.
Companies can make application through existing SBA 7(a) lenders. A list of the 100 most active can be found here.
Best of Luck and Stay Healthy!
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