CARES Act - Paycheck Protection Program - Forgivable Loans

GENERAL

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Posted by Admin Posted on Mar 30 2020

CARES Act – Paycheck Protection Program - Forgivable Loans
The Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was signed into law on March
27, 2020. One of the provisions of the CARES Act is the Paycheck Protection Program (“PPP”), which
provides businesses access to loans to pay certain expenses due to hardships faced by the COVID-19
outbreak and related business disruptions. This summary of PPP does not detail all the law’s nuances.
Eligible Businesses
• PPP loans are generally available to employers with 500 or fewer employees.
• Businesses must make certifications when applying for the loan that include:
o The “uncertainty of current economic conditions makes necessary the loan request to
support ongoing operations”.
o The “funds will be used to retain workers and maintain payroll or make mortgage
payments, lease payments and utility payments”.
• Unlike regular Small Business Administration (SBA) 7(a) loans, a business is not required to show
that credit is unavailable elsewhere or demonstrate repayment ability.
• Eligible businesses include self-employed and individual contractors.
Who Makes PPP Loans
• PPP loans are made from banks that are approved by the SBA; they are not made directly from
the SBA.
• Therefore, in general, a business should contact their regular bank.
PPP Loan Terms
• Interest rate is capped at 4%.
• PPP loans do not require collateral or personal guarantees. There is no recourse to owners of
businesses for nonpayment except to the extent proceeds are used for unauthorized purposes.
• There are no prepayment, guaranty or annual fees.
• PPP loans are backed by a 100% guaranty from the SBA.
• Payments for PPP loans will be deferred for 6 to 12 months.
• To the extent PPP loans are used to pay Covered Expenses (see below), the principle and interest
will be forgiven.
• The remaining balance not used for Covered Expenses and forgiven, is paid back over a period
not to exceed 10 years.
PPP Loan Amount
• The maximum PPP loan available to a business is the lesser of;
o 2.5 times the average monthly Payroll Costs of the business over the rolling 12 months
immediately prior to the making of the loan or
o $10 million.
• Payroll Costs include;
o For each employee, up to $100,000 of wages, commissions, tips, vacation and other paid
time off, plus group health care costs including employer portion of insurance
premiums, retirement plan contributions, and state and local taxes on wages.
o Amounts paid to independent contractors.
• Payroll Costs for a sole proprietor include any compensation up to $100,000 (1099-Misc).
Covered Expenses – What to pay with PPP Loan Proceeds
• Payroll Costs (see detail above).
• Mortgage interest on loans incurred before February 15, 2020.
• Rent under a lease agreement that existed before February 15, 2020.
• Utilities including electricity, gas, water, sewer, telephone and internet access for which service
began before February 15, 2020.
Forgiveness
• To the extent the loan proceeds are used to pay Covered Expenses during the 8-week period
after the loan is made, the loan will be forgiven.
• The loan forgiveness is not considered taxable income.
• However, the amount forgiven is reduced based on;
o Failure to maintain the average number of full-time equivalent employees versus the
period from either February 15, 2019 through June 30, 2019, or January 1, 2020 or
February 29, 2020 as selected by the business, or,
o To the extent that compensation for any person making under $100,000 per year is
reduced by more than 25%.
• Reductions in the number of employees or compensation occurring between February 15, 2020
and April 27, 2020 will generally be ignored to the extent reversed (i.e. employees re-hired) by
June 30 ,2020.
Practical Pointers
• If a business did not have Payroll Costs prior to February 29, 2020, they are not eligible.
• While the loan proceeds can be as much as to 2.5 months of Payroll Costs, in order to be forgiven
the proceeds must be spent within 8 weeks on payroll and/or other Covered Expenses.
• With no fees and standard loan terms, the “best” lender may be whoever can fund the quickest.
• Math will be involved. Determining the maximum loan amount, the amount of Covered
Expenses and how much will be forgiven are crucial. No worries. S&Co are excellent accountants.

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Families First Coronavirus Response Act - HR 6201

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Posted by Admin Posted on Mar 20 2020

 

Families First Coronavirus Response Act

President Trump signed the legislation on March 18th.  Like any federal law, it becomes effective 15 days later; April 2nd.  While the IRS and Department of Labor must still issue regulations on implementation, there are 2 key provisions that may impact your employees; Emergency Leave and Sick Leave. 

 

Impact on Employers

Employers with less than 500 employees generally must comply with both provisions and the cost will be paid back through refundable credits on quarterly payroll reports.  To reiterate, the employer fronts the cash and gets money back from the government after the fact.  These are not permanent benefits; they expire on December 31, 2020.

 

Emergency Leave

Employees must have (a) worked at least 30 days prior to taking leave and (b) is unable to work or telework because they are caring for their minor child due to school or childcare provider being closed. Care for a minor child is the only qualifying need.

 

Employee is entitled to a total of 12 weeks.  The first 10 workdays are unpaid but the employee can use any other vacation or paid time off otherwise provided by the employer for this period.  Weeks 3 through 12 are paid at 2/3rds regular pay; limited to $200 per day and $10,000 in total for the 10 weeks.

 

These benefits are pro-rated for part-time employees and the employee is generally entitled to job restoration after the leave period ends.

 

Sick Leave

An employee is entitled to up to 80 hours of paid sick leave if the employee is;

1. subject to a federal, state or local quarantine or isolation order related to COVID-19;

2. advised by a health care provider to self-quarantine due to COVID-19 concerns;

3. experiencing COVID-19 symptoms and seeking medical diagnosis;

4. caring for an individual (family or non-family member) subject to a federal, state or local quarantine or isolation order or advised by a health care provider to self-quarantine due to COVID-19 concerns;

5. caring for the employee 's child if the child's school or place of care is closed or the child's care provider is unavailable due to public health emergency; or

6. experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.

 

Subject to a cap of $511 per day and $5,110 for full two weeks, an employee would be paid as follows;

• For reasons 1, 2 or 3, the employee would be paid at their full regular rate.

• For reasons 4, 5 or 6, the employee would be paid at 2/3rds of their regular rate.

 

An employee can qualify for both Emergency Leave and Sick Leave only if they are caring for their minor child(ren).

 

Rothrock Payroll's Plan for Continuity of Services during Coronavirus

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Posted by Admin Posted on Mar 18 2020

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Congressional Action

The Families First Coronavirus Response Act (HR 6201) that is currently proceeding through congress has several provisions designed to assist employees that are impacted by this national emergency.  There are 2 provisions in particular worth noting.    

1 – All employers with less than 500 employees will be required to provide 80 hours of paid sick leave to an employee that is impacted by the coronavirus.  Employers with less than 50 employees would be subsequently reimbursed from the federal government.

2 – In addition HR6201 provides that an employee may take up to 12 weeks of paid, job protected leave.  The pay would be 2/3rds of that employees’ regular compensation.

 

Here is a link that summarizes these provisions in plain English - https://www.natlawreview.com/article/families-first-coronavirus-response-act

 

Both these provisions are preliminary.  As soon as we have final legislation, we will provide concise, detailed information to you.

 

Schulte & Company / Rothrock Payroll Services Continuity of Services

In the meanwhile, just in case Schulte & Company CPAs and/or Rothrock Payroll Services are mandated to close our doors to the public, we have thought through our plan for continuity of service.  To be clear, we will be complaint with any government directives; but some of our functions would be classified as essential and permitted to continue. 

 

Staffing and Office

• Approximately half of our personnel will work remotely.  A few will be required to continue working on site and others will not be working.

• Most of the S&Co team will be accessible via email.

• The doors to the building will be locked to the public.

• We will primarily utilize email, portals, remote desktops and telephone to perform functions and deliver services.

• For materials you would normally deliver to us, we have a large, white drop box just outside the main entrance.  Any items placed in the drop box should be placed in a sealed envelope with your name on it.   

• For materials you would normally pick up, we also have a combination lock pick-up box that we can utilized.  The combination will be shared and changed as needed.

 

Some specifics for delivery of our services;

 

Tax Returns – We will continue to work on tax returns.

• Many of our staff will be working remotely.  This is a somewhat inefficient method and turn-around times may be compromised. 

• While we expect some relief from IRS filing deadlines, nothing is certain.  Therefore, if a tax return that is due April 15th has not yet been accepted via E-File, we are extending it immediately.

• This is an extension of time to file, not an extension of time to pay.  But… 

• If an amount is due with the extension for a return due on April 15th, the White House announced that the IRS will provide 90 days to make those payments free of interest.

• Clients can provide source documents to us via the large, white S&Co drop box, their portal or email.

• Finished tax returns will be transmitted to clients via portals, picked up from the client pick-up box or shipped via UPS; assuming UPS continues to work.

• Signatures authorizing us to E-File (Form 8879) along with payments can be dropped in the white S&Co drop box.  If prior payments arrangements have been made, signature authorization can also be emailed or via portal. 

 

Payroll – We will continue to process payroll.

• A business that has authorized us to process payroll via continuing pay resolution will continue to be paid normally.

• Businesses with salary employees will continue to be paid unless instructed otherwise.

• Businesses with hourly employees will be paid only if the business provides us input; such as hours worked.

• Hourly information along with other payroll input can be delivered only via email or remote software.          

• Completed output for payrolls will be sent via email or UPS at client expense; there will be no office pick-up.

 

Accounting – We will continue to provide accounting services with a focus on bill pay and required sales tax filings.

• All input must be delivered to us electronically; email or portal.

• Client bill pay will only occur on Fridays.

• Audits that are in progress will be completed in a timely fashion.

• Year end 2019 financial statements will be prepared if needed to complete the tax return or after normal business operations resume if not needed for the tax return.

• Interim financial statements will be prepared after businesses are normal business operations are permitted to resume.

• All output will be placed in the locked pick-up box or sent via UPS.

 

Thank you and stay healthy.

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New Overtime Rules Approved

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Posted by Admin Posted on Oct 04 2019

Starting in 2020, workers making less than $35,500 per year will be entitled to overtime pay from their employers.  The new rule was announced by the Department of Labor this past week.  Prior to this rule change, the threshold was set at $23,600.  The prior rule has been in effect since 2004.

The new rule raises the previous threshold requiring employers to pay their employees overtime rate, which is 1.5 times a worker’s typical rate, for any hours worked over 40 in a work week.  Any hours in excess of 40 must be paid at the higher rate.  Any employees on a salary base making less than $35,500 will need to track hours worked. 

Rothrock payroll offers various time clocks to aid with your time keeping as well as available to help answer any questions regarding this upcoming change. 

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How secure do you feel with your payroll company?

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Posted by Admin Posted on Sept 26 2019

Thousands of employees are left without paychecks after MyPayrollHR, a cloud-based New York company, abruptly shut down this past week.  The company allegedly vanished with almost $35 million in payroll funds from customers, effecting employees who received direct deposits.  It is reported that not only payroll funds disappeared, but so did money belonging to employees.  One MyPayrollHR client claims it is owed approximately $26 million.

MyPayrollHR sent an email to its 4000 clients stating it would be closing its doors and instructed to secure another payroll firm.  Legal action is inevitable and clients are left scrambling to make sure that their employees have been made whole.

In the wake of this shocking news, how secure do you feel with your payroll company?

Rothrock Payroll has been in business for over 20 years.  We pride ourselves on maintaining the highest ethical standards, trustworthiness and confidentiality.   

Reliability - Rothrock's highly-trained and experienced staff uses state-of-the-art technology and systems that ensure your payroll is processed accurately and confidentially. The result is that your payroll is processed on-time every time. 

Peace of Mind - Payroll-related audits are an expected part of business. While our competitors routinely refer you to your accountant, Rothrock actually represents you during any inquiries from federal, state or local governments. We have extensive experience in audit representation and tax negotiation, and have on-site CPAs to help defend you.

Cost Savings - Rothrock doesn't charge separately for deletions, reporting or W-2s. Your cost is based on the number of people getting paid plus any out-of-pocket expenses. Rothrock actively works to reduce your payroll expenses. We identify and recommend tax-advantaged methods of compensation, review unemployment rates, and actively assist our clients in controlling worker's compensation costs

Don’t leave your company or your employees open to risk.  Contact us today for a review.

Rothrock Payroll Services is ready to help and guarantees a quick and easy transition.  

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Welcome to Our Blog!

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Posted by Admin Posted on June 20 2017

This is the home of our new blog. Check back often for updates!