Fluent in Practice Management

Banks are currently allowing you to submit PPP loan forgiveness applications on the first round of PPP funds. Should you apply for forgiveness or wait?
This is what we recommend for loans that are $150,000 or less:

• Please check with the manager in charge of your accounting to determine if you are eligible for the Employee Retention Credit (ERC) and if it crosses over the period covered by your PPP loan.
  • If the ERC period does cross over the period covered by your PPP loan, we recommend that you WAIT and not apply for PPP loan forgiveness yet.
    • Your goal will be to maximize both the Employee Retention Credit and PPP loan forgiveness. Since both use payroll costs, the strategy for maximizing the tax credit and loan forgiveness will require planning. To understand more about the ERC and how it may benefit you, here is a link to a prior blog:  https://www.fluenceportland.com/budgeting/the-employee-retention-credit-a-tax-credit-that-may-benefit-you
• If the ERC period does not cross over the period covered by your PPP loan and you did not ask for our help to track and apply for loan forgiveness, we recommend that you go ahead and submit your application.
  • You need to create workpapers to back up the information you supply on the application.
• Please see the end of this blog for the information you need to collect and retain for four years.
• If the ERC period does not cross over the period covered by your PPP loan and you asked us for help to apply for loan forgiveness, or you will want our help, we will provide the help you need after tax season.
  • For most of our clients, we have already partially or fully completed the workpapers that are required to be kept for four years after filing the application.
• After tax season, we will give you both the application and the information you need to submit to your bank. The information packet will include the workpapers you need to keep for four years.
• If you have not asked for our help but would like us to do this service for you, please let us know, and we will add you to our list.
• Remember, you have up to ten months after your PPP loan forgiveness period ended to submit for forgiveness. If you received this loan in April, then you are looking at a day in July as the final deadline to submit. If in May, then August. We will make sure you have submitted for loan forgiveness well before the due date.

This is what we recommend for loans that are over $150,000:

• The application process for loans over $150,000 is complicated.  In addition, the supporting information that accompanies the application is also more complex.
  • If we are helping you submit for loan forgiveness, we will complete this process after tax season.
• If you are submitting the application without our help, and if the ERC period does not cross the period covered by your PPP loan, you can submit at this point.
• Remember, you will be required to submit documentation when you apply for forgiveness (see below).

Here is the information you will need to keep for four years no matter the size of the loan, and you will submit this to the bank with your PPP forgiveness application if your loan is over $150,000:
Payroll Documentation:

• Payroll report for the covered period (remember you can use 8 or 24 weeks).
  • If the payroll report is not from a third-party provider, please provide bank statements for the covered period.
• 941’s for Q1-Q4 2020 or the equivalent via third-party payroll reports.
• Payment receipts, cancelled checks, or account statements documenting the amount of any employer contributions to employee group health, life, disability, vision or dental insurance and retirement plans that the borrower included in the Requested Loan Forgiveness Amount.
• If you are a Schedule C with no employees, all you need to provide is your Schedule C and statements.

Non-Payroll Documentation – only if you used these expenses on your application:

• Business mortgage interest payments – amortization schedule or invoices and cancelled checks/bank statements.
• Business rent or lease payments – copy of current lease agreement and receipts or cancelled checks.
• Business utility payments – copy of bills for the covered period and cancelled checks/bank statements.
• Covered operations expenditures – invoices/orders/ or purchase orders made during the covered period and cancelled checks/bank statements.
• Covered property damage costs – invoices/orders or account statements verifying those eligible payments. Documentation that the costs were related to property damage and vandalism or looting due to public disturbances that occurred during 2020 and such costs were not covered by insurance or other compensation.
• Covered supplier costs – copy of contracts, orders, or purchase orders in effect at any time before the Covered Period (except for perishable goods), copy of invoices, orders, or purchase orders paid during the Covered Period and receipts, cancelled checks, or account statements verifying those eligible payments.
• Covered worker protection expenditures – invoices, orders, or purchase orders paid during the Covered Period and receipts, cancelled checks, or account statements verifying those eligible payments. Documentation that the expenditures were used by the borrower to comply with applicable COVID-19 guidance during the Covered Period.

With so many banks informing their customers about PPP loan forgiveness applications, we have received a lot of questions about when to apply. We hope this blog provides the information you need about the timeline for submitting your application. If you have asked for our help in submitting for loan forgiveness, we will focus on the application after tax season.