PPP forgiveness: No need to rush, and other tips (Copy)

Article details sourced from Jeff Drew and Ken Tysiac at the Journal of Accountancy

Although forgiveness for Paycheck Protection Program (PPP) loans is a foremost topic on the minds of borrowers and the CPAs who advise them, experts are saying borrowers should not rush to apply for forgiveness.

If you have any questions about PPP forgiveness please call Egdamin, Hu CPA, Inc T (808) 935-3337 or email us at info@eghucpa.com.

Long-expected FAQs expected to clarify many PPP-related issues are still awaited from the U.S. Small Business Administration (SBA) and Treasury. In addition, the loan forgiveness application has not been updated to reflect the recent five-week extension of the program’s deadline to Aug. 8.

A big reason for these delays is that Congress is debating a new round of COVID-19 relief, which is expected to include a second PPP initiative more targeted than the first one, said Mark Peterson, the executive vice president who heads the AICPA’s advocacy team in Washington, D.C. Those discussions also may include major changes relaxing the forgiveness requirements for the smallest loans, possibly those up to $100,000 or $150,000.

“The situation is very dynamic,” Peterson said on Thursday during the AICPA’s weekly Town Hall covering PPP and other issues related to the COVID-19 recession and recovery efforts.

Erik Asgeirsson, CEO of CPA.com, the technology and business subsidiary of the AICPA, said during the Town Hall that the SBA and Treasury are not expected to release the expected 25 to 30 FAQs before President Donald Trump signs new relief legislation. Congress is trying to hammer out a package before going on recess Aug. 8.

Even if the FAQs do come out, the SBA issued a procedural notice Thursday that indicated it would not begin accepting PPP forgiveness submissions from lenders until a new software-as-a-service platform currently under development goes live Aug. 10. The SBA said the launch could be delayed if new legislation changes the forgiveness process in ways that require changes to the new platform.

The SBA’s notice adds another reason for waiting to work on PPP loan forgiveness applications to those covered in an AICPA blog post that published July 14, said Mark Koziel, CPA, CGMA, the Association of International Certified Professional Accountant’s executive vice president–Public Practice.

“We have to be as patient as possible,” he said.

The real PPP forgiveness deadline

Kari Hipsak, CPA, CGMA, an Association senior manager, said in an interview the important deadline in the PPP forgiveness process doesn’t come until 10 months after the end of the loan’s covered period.

At that point, if forgiveness forms have not been submitted, the funds officially become a loan that needs to be repaid. Hipsak said it’s best for borrowers to take their time and make sure they have as much information as possible so they can maximize loan forgiveness.

“There’s no need to rush through the forgiveness,” she said. “A lot of businesses, I think, want to put the forgiveness behind them, but there are still a lot of unanswered questions. And so as long as there’s not a deadline to have this application submitted, other than 10 months after the end of the covered period, it’s really a business decision.”

Some additional considerations related to PPP forgiveness include:

Questions about utilities. Utilities are among the items besides payroll that borrowers can pay with PPP funds. But there are questions about what qualifies as a utility under the PPP guidance.

“It includes the basics, such as trash collection, water, electricity, etc., but we get a lot of questions about business-specific utilities,” Hipsak said. “And there is even some guidance that indicates that transportation costs such as fuel for a business vehicle is includible. But we don’t have all the answers for that yet.”

Internet services, which have become even more vital in this time of social distancing, appear to qualify as utilities under the PPP, Hipsak said.

Many exceptions to full-time-equivalent (FTE) rules. The PPP was designed to help organizations keep paying their employees as pandemic-related closures and slowdowns reduced revenue. As a result, employers who reduce their workforce generally see a reduction in their PPP forgiveness eligibility amount.

But there are numerous exceptions for situations such as:

• An employee who was offered a chance to return to a position but refused.

• An employee who was fired for cause or voluntarily resigned.

• An employee who voluntarily requested and received a reduction in hours.

There are additional exceptions as well to the FTE and wage rules, and borrowers should be aware of them when they apply for forgiveness.

Clarification needed for self-employed borrowers. PPP guidance states that self-employed individuals must compare their 2020 income with their 2019 income to determine their maximum eligible compensation. “If you’re a self-employed individual, how do you prove what you got paid in 2020?” Hipsak said. “That’s one big question that remains for self-employed individuals.”

Documentation is critical. The forgiveness applications are extremely detailed, and the final rules are uncertain in some areas.

Some documentation isn’t required for submission with the forgiveness application but is required to be retained by the borrower. So it’s important to keep documentation of any facts that could become an issue related to forgiveness.

“It’s always easier to be prepared going into something than having to look in hindsight and collect all the necessary data,” Hipsak said.

If you have any questions about PPP forgiveness please call Egdamin, Hu CPA, Inc T (808) 935-3337 or email us at info@eghucpa.com.

Tax Scams Linking to Stimulus Checks and COVID-19 (Copy)

The impacts of the COVID-19 (coronavirus) pandemic have caused economic hardship and uncertainty for millions of Americans. Unfortunately, scammers constantly seek new ways to target those in need. The IRS has therefore warned all Americans to stay alert for a rash of fraudulent calls, emails and text messages associated with the coronavirus.

Many of these scams relate to the Economic Impact Payments (EIPs, or stimulus checks) many Americans are receiving from the IRS during the crisis. The scammers often claim to be able to help people receive their stimulus payments more quickly.

The IRS urges all potential EIP recipients to be especially vigilant for unsolicited calls or messages that supposedly come from the IRS, as well as fraudulent websites and social media posts that ask for money or request your personal information. No one from the IRS will reach out to taxpayers in these ways. Instead, you can always find accurate information at irs.gov.

As a reminder, EIPs are being sent automatically to eligible Americans, including many people like retirees and recipients of VA benefits who are not required to file federal tax returns. In the vast majority of cases, you do not need to take any action to receive your payment. If the IRS has your banking information, the payment will be deposited directly to your account. Otherwise, a check will be mailed to you.

According to IRS investigators, scammers might:

• Ask you to sign over your “stimulus” check to them in exchange for some service. The safest way to handle an EIP check is to deposit it directly to your own bank account.

• Ask you to verify your personal or banking information by phone, email, text message, social media message/post, or through an impostor website. Scammers may claim that giving them this information will speed up the process of receiving your EIP, which is not true.

• Claim that they can get your EIP more quickly for you by representing you, in exchange for a fee or access to your private data. You do NOT need a representative to receive your EIP.

• Mail you a fake check, and then ask you to provide your personal information in order to cash it. Depositing an authentic EIP check will not require such action on your part.

If you have not yet received your EIP and wish to provide direct deposit information to the IRS, you should ONLY do so by using either the official IRS Get My Payment portal (if you filed a 2018 or 2019 federal tax return) or the Non-Filers: Enter Payment Info Here tool. Note that both of these websites have addresses beginning with irs.gov, and your browser should confirm that the site you are visiting is secure (usually by displaying a padlock icon next to the web address).

Under no circumstances should you provide your direct deposit or any other private information to any other website, or to anyone who contacts you in any manner and claims to represent the IRS. If the IRS needs to contact you about your EIP or any other matter, you will receive a letter on official IRS/U.S. Treasury letterhead.

Why Your Stimulus Check Amount May Be Different Than You Expected

Throughout April and May, the IRS delivered well over 100 million Economic Impact Payments (EIPs, also called stimulus payments) to Americans. It was widely publicized that many individual taxpayers would receive EIPs in the amount of $1,200, with an additional payment of $500 per qualifying child. However, the size of each payment depended on a person’s income, family circumstances, and other factors.

If your EIP amount was different than you expected, contact our team to find out why at info@eghucpa.com or (808) 935-3337.

These may be the reasons why your stimulus check may be different than you expected:

• Your adjusted gross income (AGI) may be higher than the limit to receive the maximum EIP amount. For example, single filers with an AGI above $75,000 receive a reduced EIP, with the amount decreasing to $0 for those with AGIs of $99,000 or more. Joint filers with AGIs above $150,000 also receive reduced EIPs, or no EIP if their AGI exceeds $198,000.

• Your 2018 tax return was used because you have not filed your 2019 return, or the IRS has not yet processed your 2019 return. If you have not filed your 2019 federal tax return yet, your EIP amount may have been calculated based on the AGI and family size shown on your 2018 return, which may differ from your 2019 information. Your 2018 return may also have been used if you filed your 2019 return very recently, or the IRS found an issue with your 2019 return that has delayed processing. 

• Your dependents may not qualify for the additional $500-per-child payment. To be eligible for the additional payment, dependent children generally must live with you for more than half the year and be related to you (including by adoption or foster care). Each child must also have been under the age of 17 at the end of the tax year that the IRS used to calculate your EIP (either 2018 or 2019), and have a Social Security Number (SSN) or Adoption Taxpayer Identification Number (ATIN).

• Your payment may have been reduced due to payments you owe, such as past-due child support or other debts. In the event of a reduction due to child support owed, you should receive a notice from the Bureau of the Fiscal Service explaining the reduction. For all other debts, creditors can only gain access to your EIP after it is deposited into your bank account, so your bank records should show the deduction.

If you were entitled to a larger EIP than the one you actually received (for example, if you had a child in 2019 but have not yet filed your 2019 federal tax return), you may be able to claim a credit on your 2020 tax return for any additional amount you are owed.

Unfortunately, because EIPs were sent based on 2018 and 2019 tax returns, many Americans have received checks made out to relatives who are deceased. The IRS has stated that these payments must be returned. The easiest way to return such a payment is to write “VOID” in the endorsement area on the back of the check and mail it to the nearest IRS Service Center (addresses available at irs.gov), with a note explaining why you are returning it.

If your EIP amount was different than you expected, contact our team to find out why at info@eghucpa.com or (808) 935-3337.

Stimulus Check Automatic Bank Payment Exceptions

The IRS is continuing to send COVID-19 Economic Impact Payments (EIPs, also called stimulus payments) to millions of Americans weekly. The vast majority of eligible recipients will get their EIPs automatically without taking any action. However, some people will need to complete a few simple steps in order to receive the full payment to which they are entitled.

If any of the following apply to you, you should receive your EIP automatically:

• You filed a 2018 or 2019 federal income tax return

• You receive Social Security retirement or disability benefits

• You receive Railroad Retirement benefits

• You receive Supplemental Security Income (SSI) benefits

• You receive Veterans Affairs (VA) benefits

If you filed a 2018 or 2019 federal return and provided direct deposit information to receive your refund, your EIP will be automatically deposited to that bank account. Otherwise, you will receive a check in the mail. If you have not yet received your EIP and wish to provide the IRS with direct deposit information, you can do so by using the Get My Payment portal, which is now available in both an English version and a Spanish version.

If you receive Social Security, Railroad Retirement, SSI or VA benefits, your EIP will come to you in the same way as your regular benefits payments, such as through direct deposit or as a mailed check. Note that the payment will come from the U.S. Treasury, not your normal benefits provider. In most cases, individuals who receive any of these benefit types and are not required to file federal tax returns will receive an EIP of $1,200.

However, if you receive these benefits and also have dependent children under the age of 17, you may qualify for an additional payment of $500 per child. In order to claim this additional benefit, you may need to register your children using the IRS Non-Filers: Enter Payment Info Here portal. The deadline to register and have the $500-per-child payment added to your EIP has passed, but you may still receive the supplemental payment at a later date, or be able to claim a refundable credit for the additional amount by filing a 2020 tax return.

The EIP portal for non-filers is especially important for those who do not receive any of the above benefits and are not required to file federal returns due to low income (typically, below $24,400 for couples or $12,200 for individuals in 2019). If these circumstances apply to you, the IRS likely does not have sufficient information to send you an EIP. You should enter your information using the EIP portal for non-filers as soon as possible. Like the Get My Payment portal, this portal is available in English and Spanish versions.

As a reminder, EIPs are NOT taxable income, so you will not need to report your payment on your 2020 federal, state or local tax returns.