PPP Loan forgiveness from a Small Business CPA

by NumbersCPA123

I own a 15 person CPA firm that provides outsourced CFO services for 150 or so small businesses. We prepared PPP Loan applications for all of them, plus some 200 non clients. All but one was approved (he filed bankruptcy on SBA in 2019). Obviously now we are bombarded with questions about loan forgiveness. My team and I have spent over 100 hours in webinars and other online education courses in the last 6 weeks. It’s mind numbing.

Here is what we are living with, this program was pushed out with out thought of what the endgame looks like. In business, we can be good, fast, or cheap, pick two. We got fast and cheap.

Now SBA is rolling out regulations, and their claws are out. Right now they are staring down big business, with access to capital markets. Those folks are paying back loans and running for the hills over the bad press.

Next will be small businesses who try and “game the system”. I have heard DOZENS of people talk about how they planned to game the system, pay it all to themselves, yada, yada, yada. Final regulations have not been written yet. We don’t know what the SBA will eventually require, but to think a $660 BILLION potential give away will not be heavily scrutinized is a fool’s error.

The SBA may be evil (In my opinion they are), but they are not stupid. They can change what the law means. They did so with EIDL being $1K/employee when they got around to it instead of $10K in 3 days. WE are not governed by laws, we are governed by regulations which are written by gooberment bureaucrats with a bad comb over who never work a second more than their 37.5 hour week as mandated by their federal goobermentn union contract, will never face an election, hate small business owners, and now are working from home on their staycation as they type regulation while wearing their pajamas.

They know how people will try and game the system. The requirements contain the 75% to payroll we all know about, they also control the 75% “headcount” or staffing requirement. Headcount can end up being “bodies” on payroll, or full time equivalent employees (FTEE’s). There is language being battered around about using the FTEE formula used in Obama Care. We don’t know for sure what the “final interim guidance” will look like. Of the 100’s of hours of professional CE we have taken, about 1/2 say the requirement will be headcount, 1/2 say it will be FTEE. So plan on both being required.

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If you play this straight down the middle, use the money for payroll, keep the # of employees as before, you will be fine. Anything less, and it could go bad, very bad. Some people, a very small percentage, will be criminally charged for fraud. Obviously if you do not pay employees with the PPP money, you took the loan out fraudulently. I believe that is what the SBA will say.

I get it, many of you have employees at home, they can not come to work, they want unemployment because it’s more than their wages. I have spoken to no less than 100 employers in this situation. I am advising pay your employees. If you have direct deposit for them, use that and pay them their average wages pre-china virus. If not, print and mail checks. That is what you said would happen when you took out the loan, so do that.

Yes, if you have a spouse/child who helps in your business, hire them. There is nothing that prohibits the hiring of new employees. But it needs to be legit. Is your spouse/child helping with bookkeeping, deliveries, estimating, cleaning the office, filing, making phone calls, whatever? Can they start doing so? If you hire your spouse/child during the 8 week test period it’s not a problem, if you document what they did to help your business. No documentation might mean a problem.

I don’t think banks will question names and SS# of employees if you play this just like you said you would when taking out the loan. But if you do not, they will have to dig around in your employment underwear drawer and dig out details so they can figure out how much is forgivable, and how much is not. The “method” to calculate how much will be forgiven in questionable situations is an unknown at this point. That sucks, we are living in the test period, and we don’t know the details of the “test” we will have to pass. So be very careful, do nothing funny, don’t try and game the system.

If you are a Sole Proprietor, with no employees, you may have to pay some of the loan back. No one knows for sure, the guidance is not fully written or developed. I suggest in that situation, put at least 50% of the loan in a saving account and just wait until we know more. That is being overly cautious, but you will not get in a financial bind if you do so.

We are told mortgage interest and utilities for a HOME are NOT eligible expenses for loan forgiveness.

That is why some think SP’s with no employees who work from home may have to pay some of the loan back.

My advice is DO NOT try and game the system. Play this straight down the middle, do exactly what the letter, AND spirit of the law requires., and you will be fine. I have 100% confidence my loan will be repaid. I’m playing this right, I’m increasing staffing and will pay out more in wages than the test period. I’m giving bonuses to employees to make sure that happens. I got a windfall, so should they. Even though I won’t get a stimulus check, and they did. I suggest doing the same.

Some employees will be upset you paid them, and then when you get that form to explain why they are not working, explain you have been paying them. Let them deal with the fallout of fraudulently applying for unemployment. Either you or they will pay that back. they got the money, they should pay it back.

Just be careful and do exactly what you said you would do with the loan proceeds and it won’t be a problem, anything less, I think it will be a problem.

Now to the Chinese Communist Party lovers, I am not one of you. This is a China virus, and a Chinese Communist Party Virus. That country is fucking evil. Some of you hate Trump so much you want to blame him for the virus. Just go ahead and spew your vile and hate, no one takes you seriously. The Chinese government is EVIL. They ARE as bad as Hitler. You siding with them because you hate Trump exposes much. Quite being a liberal sheep. I’m not asking you to agree with me, just agree who our true enemy is.

I’m also no fan of gooberment, and I have probably had a LOT more experience with stupid, hate filled, anti-small business gooberment regulators than you will in 50 years. Yal, I hate most of these people, and most of them hate you, but for the haters, the democrats have you so brainwashed you would rather side with the people who hate you than some trying to help you. So go with your gut, ignore my advice, and get fucked over. We can tally score when the war is over. It’s entirely possible I love your children more than you do.

 

Disclaimer: This is a guest post