Practice owners who received the PPP loan earlier this year had 24 weeks to spend the funds on certain payroll and facility expenses to qualify for full forgiveness of that loan. For many of our clients, the 24-week Covered Period has recently ended.
Did you know that you have 10 months following the end of the Covered Period to file the paperwork with your lender to apply for full forgiveness of the PPP loan? We are generally recommending that our clients do NOT rush to complete the loan forgiveness paperwork. Believe it or not, the PPP loan forgiveness rules are still fluid as follows:
1. The SBA is considering waving the requirement for businesses that borrowed less than $150k in PPP funds to file any type of forgiveness application with their lender.
2. Perhaps the EIDL grant will also be forgiven for businesses that borrowed less than $150k. Currently, you?re required to repay that grant of $1k per employee received last spring as part of the PPP Loan forgiveness process.
We have prepared the PPP loan forgiveness application for a few clients so far and have found the paperwork to be extremely labor intensive. For that reason, we will charge our clients who request our assistance with their application the following:
? If we provide both accounting and payroll services to your practice $ 750
? If we provide accounting services but not payroll services $1,500
? If we don?t provide accounting or payroll services to your practice $2,500
Since the rules are fluid, you still have 10 months before the paperwork is due, and there is a decent chance that no paperwork will ultimately be required, why rush to start the PPP Loan forgiveness paperwork at this time?
With the pandemic impacting the economy to the extent it has for much of the year, many practice owners found themselves collecting unemployment for the first time in their lives. Although unemployment insurance (UI) is a government program helping taxpayers out of work, expect to pay federal and state income taxes on any benefits received. Same goes for the Pandemic Unemployment Assistance (PUA) many received in addition to their state?s UI benefit.
To help plan for the taxes owed on this income, taxpayers can voluntarily choose to have 10% of their periodic UI received withheld for federal income taxes by providing a completed Form W-4V (https://www.irs.gov/pub/irs-pdf/fw4v.pdf) to the paying agency, instructing the agency to withhold taxes.
Please note that having 10% withheld for federal income taxes may not be enough in most cases. If you are in a higher tax bracket (12%, 22%, 24% or higher), you will most likely be under-withheld for federal taxes and might consider making quarterly estimated tax payments and/or having additional federal and state income taxes withheld from your pay once employed again. You can submit your estimated tax payments by check with a payment voucher via mail or electronically online via this IRS website:
The SBA made it very easy for practice owners to receive an EIDL loan of up to $150k with a fixed 3.75% interest rate over a 30-year term. And a lot of practice owners decided to accept this EIDL loan.
As we posted: https://www.schwartzaccountants.com/2020/05/more-info-about-eidls/, there are various pitfalls that come along with this SBA loan. For starters, the sole purpose of the EIDL loan is to help businesses survive through an Economic Injury or Disaster.
The instructions issued by the SBA specifically prohibit many other uses of EIDL funds including:
? Paying dividends or bonuses
? Expanding your facility
? Purchasing equipment
? Relocating your practice
Please note that the healthcare lending community isn?t very keen on these loans either, since having an EIDL makes it more difficult for you to refinance your existing practice debt to another lender.
If you took the EIDL loan, please consider paying off the EIDL once your practice returns to pre-Covid profitability and you are almost 100% certain that you won?t rely on these funds in the future.
To repay the EIDL loan:
1. Go to the website: pay.gov
2. Create a new account (Choose ?Create Company Account?.
3. Once account is created, you will need your EIDL loan number
4. After completing the set-up, you can pay back your loan either in full or by partial payments
For individual taxpayers who filed an extension, the deadline to submit your final 2019 tax return is Thursday, October 15.
A few tips to remember:
? You can file your return any time before that date.
? If you?re due a refund, make sure you muse direct deposit to receive your refund.
? If you owe taxes, you can pay online from a checking or savings account at IRS Direct Pay.
? Pay any balance due as soon as possible to reduce interest and penalties for late payment (the deadline to pay for 2019 income taxes due was July 15, 2020).
? If you missed the deadline to request an extension (July 15, 2020), you should file and pay as soon as possible. This will help reduce your interest and any penalties you may receive.