Ensure PPP Loan Forgiveness
The Payroll Protection Program (PPP) loan is a key piece of the CARES Act. The program offers low-interest, forgivable loans to small businesses through their banking institution. The loans are meant to help businesses stay afloat and keep employees on the payroll.
In order for the PPP loan to be forgiven, you have just eight weeks to use the loan proceeds.Take these five key steps to utilize and account for the funds properly.
Contact your employees.
Now that you have funding, you can reemploy any employees you laid off or furloughed. Make sure you document your reemployment offers and employee responses in writing.
Use the money for the right expenses.
The best way to maximize the loan forgiveness is to use the money for forgivable expenses, which include:
- Payroll costs.This includes the gross payroll paid to the employee, health insurance payments, state unemployment benefits and employer retirement plan contributions. Payroll-related costs need to be at least 75% of eligible expenses to avoid a reduction in the amount of the loan forgiven.
- Rent or mortgage interest for contracts in place prior to February 15, 2020.
- Interest on loans in place prior to February 15, 2020.
- Payment for utility services in place prior to February 15, 2020.
Set up a new bank account.
In order to get your PPP loan forgiven, you need to prove you spent the funds on the right things. Having a bank account solely dedicated to PPP expenses will make them easier to track.
Document Everything.
You must spend the funds on pre-specified expenses and be able to prove it. So, you’ll need to track and itemize every expense. Be sure each entry includes:
- The amount you spent
- The date you spent it
- What you spent it on
- The reason for the expense
Apply for forgiveness.
If you meet the criteria, 100% of the PPP loan is forgivable. So, when the time comes, apply through your lender.
If you didn’t get a chance to apply for the first round of the Payroll Protection Program, there’s still time to apply for the second round of PPP loan funding.
Special Healthcare Benefits Enrollment Event
The IRS is allowing changes to employer-sponsored health plans and adjustments of pretax contributions to flexible spending accounts. Insurers may permit employers to provide a limited mid-year enrollment window for health plan coverage. During this window, employees are able to:
- Enroll in employer-sponsored health plans during the plan year, even if they had previously declined enrollment.
- Switch plans or tiers within their plans.
- Enroll, drop, and increase or decrease payroll-deducted contributions to flexible spending accounts.
Contact your benefits plan representative for more information and reach out to us with any tax and accounting-related concerns.
Our team is staying on top of all the unique issues associated with COVID-19. If you have questions pertaining to your loan, benefits plans, or need help adjusting your current business strategy, the staff at Boris Benic and Associates is available by phone, email, text, and video chat to provide answers.