How Payroll Systems are Working to Get Loan Money in the Hands of Small Businesses

Webinar Summary
This webinar’s panelists discussed payroll system operators’ role in the broader stimulus and loan efforts undertaken by recent government action, and outlined relief options available for small businesses. The panelists focused on the Employee Retention Tax Credit and Paycheck Protection Program Loan provisions of the recent CARES Act, and how payroll processers can act as trusted advisors on the front and back-end of loan forgiveness provisions through documentation and record-keeping compliance.

Below are key bullet points from the webinar –

• Small and Medium-sized businesses will benefit most from several provisions of recently passed legislation, including the Employee Retention Tax Credit, and the Paycheck Protection Program
• The Employee Retention Tax Credit is equal to 50% of qualified wages if your business’ operations are suspended due to a COVID-19-related shutdown; or, if gross receipts are reduced 50% or more from the same quarter in prior year
• Delay and deferment of employer payroll taxes: pay 50% of deferred amount by year-end 2021
• Analyze best loan and loan forgiveness options with your trusted advisors (accountants, counsel) to determine the best course of action to apply for loans to provide liquidity

Full Bullets –

• Payroll relief provided by recent government action
  • Families First Coronavirus Relief – DOL, Treasury
  • CARES Act
• Many operational, eligibility, applicability questions
• Weight tax, provisions, and benefits provisions
• The benefits provided by the relief bills are interactive – loans, deferral mechanism interact with each other. Think holistically about cash-flow considerations

• Employee Retention Credit
  • Equal to 50% of qualified wages paid to employees between March 12 and Dec. 31, 2020 à capped at $10,000
  • Maximum available credit is $5000 per employee (50% of 10,000)
  • Eligible if operations are suspended fully or partially due to COVID-19 related shutdown; gross receipts for quarter were less than 50% of gross receipts in same quarter of prior year
  • Employers with more than 100 would only receive credit for wages paid to employees who are not working. Employers with fewer than 100 receive credit for all wages paid to employees
• Delay of Payment of Employer Payroll Taxes
  • Permits employers to defer payment of employer portion of SS taxes that would be payable by year-end 2020
  • Pay 50% of deferred amount at year end 2021
  • Taxpayers who have small business loan debt forgiven are ineligible for this benefit à interacts with small business loan forgiveness – the forgiveness of these loans may not be known for some time, so the deferral period may not be known (this question remains to be resolved)
• Families First Sick Leave Benefits
  • Mandated for businesses fewer than 500
  • Requires 80 hours of emergency paid sick leave for all full time worker (benefits pro-rated for part time)
    • Symptoms, quarantine orders, caring for dependent
  • Rate of pay is capped at $511 per day; for those caring for others, rate of pay is 2/3 pay, capped at $200 per day

• AICPA is thinking about how to help small businesses
  • Leading a coalition for small business funding, with firms and clients to survive
  • Loan options and how we got here
• Advocating for Small Businesses to receive a grant
  • Paycheck Protection Program is essentially a grant for small businesses if the business complies with the terms of the loan
• Importance of firms getting ready to play role of trusted advisor
  • Mobilizing payroll ecosystem
  • Banking community to provide loans
• Application process should be simple
  • Simple process and implementation
  • Universal form – one pager
• Broad lender & ecosystem support to distribute funds
  • Primary goal of coalition
  • Embracing direction to expand lender pool

• What programs are you eligible to receive?
  • Do the analysis with your advisor to decide next steps
• Best options?
  • EIDL
  • Paycheck Protection Program
• Complete required process to get funding
  • Form for PPP; information on SBA site for other business relief elements
• Maintain compliance to get relief (such as loan forgiveness)

Questions:

• If you have two LLCs, do you need to file two loan applications for PPP?
  • Eligibility is for a business entity, so each entity would apply for a PPP Loan
  • Treasury is concerned about multiple applications from the same business
  • Affiliate rules of SBA if the LLCs fall under common ownership
    • Currently, affiliate rules apply unless the business falls within a 72-coding, or if the business is in a listed franchise in the SBA’s franchise registry
    • >500, then affiliate rules will likely apply
    • Not sure about administrative rules at this point
• Can payroll cover more than 8 weeks, up to 10 weeks, if you don’t have rent or interest payments
  • Ability to take a loan that is 2.5x payroll, and that loan can be used for rent, utilities, interest, payroll
  • If you used funds for 10 weeks, then the 2 weeks used would convert to a loan
  • Sit down with your advisors
• Advantage of taking $10,000 advance on EIDL or PPPL
  • New application process for EIDL – including $10,000 advance
• Decline on receipts for retention credit
  • Up to $5000 credit for continuing to pay employees even if not needed
  • 2 qualification requirements
    • Businesses that are directly, fully or partially shut down because of COVID-19
    • OR businesses experiencing significant decline in gross receipts
    • Self-certify on impact due to coronavirus
  • On PPP you have to state that you were impacted by the coronavirus, without a definition of “impact”
    • The legislation does not state the scope of “impact”
• Are EIDL and PPP mutually exclusive for the same expenses; can you take EIDL for payroll and PPP for rent and utilities? What if you use separate bank accounts to track expenses?
  • $10,000 express advance from EIDL is specific. You cannot take both
  • No forgiveness on EIDL
  • Apply for PPPL – you can keep the money and pay it back at low interest. If you want the money forgiven you’ll have to follow specific rules about use
• What is included in payroll for the month?
  • Eligible: Compensation, vacation, sick leave, benefits/premiums, retirement, state and local taxes
  • Not eligible: employee compensation over $100,000; employees whose place of residence is outside US
• You have to have been in business as of Feb. 15, 2020, and size of loan is determined by average monthly payroll costs, and requirement of maintaining size of overall payroll (incentive to retain workers)