Here’s the Latest Update:

April 6, 2020 Update For Those Applying for Paycheck Protection Loans

Important – Qualified Lending Institutions will start accepting applications for Paycheck Protection Program Loans on Friday, April 3rd.

As you are aware, the CARES act that was recently enacted, provides a number of stimulus provisions to both businesses and individuals. For small businesses, we believe the Paycheck Protection Program loan is the most important. This was discussed in our recent article and a brief summary is located at the US Chamber of Commerce website here.

As a small business we encourage you to immediately review this program and consider applying. The Small Business Administration (“SBA”) expects high demand and funds are currently limited to $350 billion nationwide, so if you want to participate, we recommend applying soon.


For BORROWERS. Also attached is the LOAN APPLICATION that lendehttps://www.pughcpas.com/wp-content/uploads/Paycheck-Protection-Program-Application-3-30-2020-v3.pdfrs will be using

 What should you do now:

  • Contact your financial institution to see if they are making PPP loans.
  • Compute your payroll costs for 2019 (if you are a seasonal business contact us for more information). Payroll costs include:
    •   salaries, wages, commissions or similar compensation
    • payment of cash tips or their equivalent
    • payment for vacation, parental, family medical or sick leave
    • allowance for dismissal or separation
    • payment for group health care benefits including insurance premiums
    • payment of retirement benefits
    • payment of state/local tax assessed on the compensation of employees (but not federal taxes)
    • the sum of payments of any compensation to or income of a sole proprietor or independent contractor that is compensation from self-employment (limited to $100,000 per year as prorated for the covered period) [1]Note – ask your Banker if you can include payments to independent contractors

The loan may be partially or fully forgiven if used for payroll costs, rent, mortgage interest, and utilities for the 8-week period following the origination of the loan. The forgiveness could be impacted if:

  • You reduce the number of employees compared to last year, or
  • You reduce the pay of any employee by more than 25% compared to last quarter

More details on the requirements are included in the links above.

Complete the application and gather the following documentation:

  • Payroll reports for 2019 and through March 2020 showing the following broken down by employee (including owners) and by month
    • Gross wages (including commission or similar compensation and cash tips or equivalent) –if any employee is paid > $100,000 on annual basis limit to $100,000 for the year
    •                 Paid time off
    •                 Paid vacation
    •                 Pay for family medical, parental, medical and sick leave
    •                 Separation or dismissal
  • Payments for group health care benefits (including premiums)
  • Payment of any retirement benefits
  • For sole proprietors or independent contractors: wages, commissions, income, or net earnings from self-employment
  • Any amount paid to 1 person in excess of $100k in one year must be excluded from payroll costs
  • Only applies to employees that reside in US
  • If applicable, evidence of funds received from an Economic Injury Disaster Loan (EIDL) since January 31, 2020 and for what they were used
  • If EIDL is to be refinanced with PPP loan, include copy of note in addition to documentation above

Caveat: Employers who receive the PPP loan will not qualify for the up to $5,000 per employee Retention Credit included in CARES. We believe most employers will come out better with the PPP Loan assuming most of it is forgiven but, in some cases, the Retention Credit may be preferable. That particularly may be the case if you have a large number of unskilled, low-paid workers or if you reduce your workforce so that much of the loan will not be forgiven. If you believe the Retention Credit may be better, contact us to discuss further.

If you have not signed up for the Pugh newsletters, I highly recommend you do so.  We are sending out information frequently and want to be sure you are receiving updates as timely as possible.  The link to sign up for Pugh news alerts can be found at the top of our home page.

As always, please contact us if you have any questions.  You can call or email your tax advisor or reach out to info@pughcpas.com.

[1] Include payments you made to independent contractors and for whom you filed Form 1099-MISC. There is some confusion currently whether these qualify


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