To our Valued MHA Clients and Friends:
Happy Friday to all of you! It is April 3rd and we are still in the surreal world of COVID-19. In Colorado, we started our day with a snowy morning but we are expecting to have a nice weekend and, once again, my hope for you all is to find something to put a smile on your face every day.
I have a quick reminder that the April 15th deadline has been postponed to July 15th so you can hang on to your money longer, if you owe tax, but you do want to file if you will qualify for the “stay at home” money using 2019 numbers. Be sure to call or email if you fall into this category so that we can prioritize your tax filing!
Breaking news: The State of Colorado has postponed the payment due date for your property taxes and sales taxes. No penalty and no interest! Sales tax payments that were due on April 20th are now due May 20th. Property taxes that were due in April are now due April and June.
Calendar year C-Corporate taxpayer tax returns are also postponed until July 15th but you also have a few additional stimulus provisions that we are reviewing. Reach out if you are a C-Corporation who suffered an operating loss last year as we want to expedite your tax return filing as well.
In today’s news for small business owners, we are primarily focused on the PPP or Paycheck Protection Program Loans. They are supposed to be available today, however, most banks are still working out the details. I’ve heard that some banks are taking applications today while some are just taking some preliminary information. I do understand that you will have to apply where you bank as many banks are only taking applications from current clients. The application period runs until June 30th, however, the program will cease once all $349 billion of funding has been allocated.
So, the questions of the week for our small business clients has been (1) EIDL or PPPL and (2) if we can complete the application for you. The answer to the 2nd question is no, however, we can provide anything you need for your application. Please don’t hesitate to reach out with questions or requests for data.
The first question is harder. Which loan? My understanding is that the answer depends on your need but most are finding the PPPL to be the better option for the short term. This loan is specifically designed for small businesses to keep employees on payroll through this crisis period. Here are some of the highlighted differences based on information available through today:
The SBA EIDL (Economic Injury Disaster Loan) program has been allocated $50 billion for the program. It allows for a loan up to $2M per small business, nonprofit, sole proprietorship and tribal business concerns based on the SBA Loan Officer determination of how much you need using annual gross receipts and cost of sales. I’ve talked to a lot of people who applied for the EIDL to get the $10,000 advance but I have not heard of anyone receiving a response. If you have received the $10,000 advance or any correspondence from the SBA on this EIDL application please let me know. I’d love to have some updated information!
The PPPL allows for a loan up to a maximum of $10M but no greater than 2.5 times your average monthly payroll costs based on the 12 months prior to the loan origination. Note that payroll is limited to $100,000 for any one employee in this calculation. This means, your maximum loan would be for an amount up to two months of your average monthly payroll costs from last year plus an additional 25% of that amount, subject to a $10 million cap. Payroll costs include most benefits plus State unemployment taxes.
Both loans can be used for payroll, rent and utilities but the EIDL can also be used for accounts payable and working capital.
Both have potential forgiveness but the EIDL forgiveness is limited to $10,000 where the PPPL allows for forgiveness for proceeds spent on qualified expenses incurred for 8 weeks following loan origination. Forgiveness of the PPPL may be reduced if the company reduces employee count or overall payroll during the pandemic period.
And the EIDL requires a personal guarantee and collateral but the PPPL does not.
Thank you all for sending me so many great flyers on the PPP Loans. I think my favorite came from our own Crystal Brady, Accounting manager. She found this one on the US Treasury website. Here is a link to that flyer:
Also remember, small businesses who are directly impacted by the lock downs qualify for a payroll tax credit for some taxes paid on wages starting April 1st. Email or call Crystal or your service provider to make sure we have the right information to get this calculated properly for you.
Please continue to reach out with questions. I am happy to talk through some of the issues that we are facing as we move forward and through this crisis and your calls and emails are giving me good ideas for these update emails!
Take care and stay strong,
Kim Hitchcock, CPA
McNurlin, Hitchcock & Associates, P.C.