August’s PPP Update, Payroll Taxes and more
Mon, Aug 17, 2020
Last week, the SBA opened its portal for PPP loan forgiveness applications. The banks are metering the influx on their end, communicating to their PPP borrowers the updates and timing when their portals will be available. Thankfully, payroll service agencies have revised their reports for use in the application process. That said, confirm your service’s reports have been fully vetted before using them to file the forgiveness application. We have identified issues with these reports in the past, so now that forgiveness applications will be available, we’re working to confirm the current version of the reports from common providers are ready for prime time. Before heading into year-end, also consider classification of debt as short-term vs long-term and address footnote disclosures. Feel free to reach out with questions on any of these issues if needed.
Payroll Tax Deferrals – what’s all the recent press about?
If you’re not following this program, the CliffsNotes version is that in March, legislation allowed for the employer portion of FICA and Medicare to be deferred through the end of the year with the repayment split evenly in 2021 and 2022. Last week, an executive order was issued that allowed for the deferral of the employee portion of FICA and Medicare payroll taxes from September through December. There is debate as to whether there also may be a forgiveness component, as the order specifically points to that possibility. However, assuming there will be anything more than a deferral is risky. Payroll tax liabilities are among the few obligations the directors and officers can be held personally liable for if funds run dry in the business. While tracking deferrals is perhaps more trouble than it’s worth, it could be the short-term boost some organizations need. If elected, the 15.4% tax deferral will require tracking, accrual and cash management for remittance at a later point in time.
There are other portions of the stimulus program that have not garnered the same degree of attention as the PPP, tax deferrals and EIDL. Organizations that have experienced a decline in operations but did not obtain the PPP loan, may still be eligible for the Employee Retention Credit.
Additionally, IRC 139 addresses qualified disaster relief payments to employees, and it permits employers to compensate employees for a variety of costs, tax free, until the pandemic is over. The employer does not need to obtain detailed receipts or other support. These amounts are tax deductible by the employer and non-taxable to the employee. Payments should reasonably represent those costs incurred as a result of the pandemic, and we are seeing companies consider costs such as employees’ home internet fees, office supplies, and more. If you have questions about this program, please let us know.
As always, but particularly during these challenging times, we’re very grateful for your business, friendships and referrals.
Thank you and stay healthy!