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PPP Round 2

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January 13, 2021

 

 

If you’re a business owner and you haven’t heard about round 2 of PPP then I need to know where you’ve been hiding because…I might want to join you there! But seriously, PPP Round 2 is all over the place right now and today I’m going to answer some of the most frequently asked questions I have received over the last couple of weeks. So keep reading along to learn more about PPP round 2!

Question #1: “What is different about Round 2 PPP loan vs the first round?”

That’s a little bit of a loaded question because in my opinion…there is a lot that is different. The first time around, it was so rushed and so last minute, and rules and information were literally changing every day. There were so many questions that at times, nobody really knew how to answer. Now, today there is still some confusion and still some things that could use some clarity…but, we’ve had about 9 months to see how PPP works and we’re in a much more knowledgeable position this time.

If you are looking for more funding, the biggest things that have changed specifically for the loan that will probably impact you as a business owner are:

  • If you received a PPP loan in Round #1, you need to have used it all up before you apply again.

So if you were not able to fulfill the payroll, the rent, utilities, those types of things, and you did not use those funds yet, you do not want to apply for funds in this second round. You want to make sure that you’ve used up those first funds before you apply again.

  • The new deadline to apply is 03/31/21.

Now,  this could change. More funds could be added, the deadline could be extended, etc. But as of right now as I am writing this blog, the deadline is March 31st, 2o21.

  • You have some more options on what to spend the money on this round. In addition to wages and rent, you can spend the funds on property damage, worker protection, and even some supplier costs (note you may not achieve 100% forgiveness this way.)

The first round of PPP was pretty strict if you were seeking forgiveness of the PPP funds. It was to be used for payroll, rent, utilities, etc. This time around you still need to be using the majority of the funds for payroll. Sixty percent of those funds need to be used for payroll, but they are going to cover things like payroll, insurance, owners compensation, retirement plan contributions, and things like that, which is really amazing! The thing I am not super clear on yet is if you use the funds for things like property damage, supplies, etc. as mentioned above, are you still going to be able to seek 100% forgiveness? Well, we are still waiting for the final guidance to come out for that. My assumption is that you will be able to just like in the first round. As long as you used those funds for 60% payroll, plus rent, utilities, things like that, you were able to seek 100% forgiveness and I do expect that to be the same in round 2 with those additional expenses added on, which is really cool!

  • You need to have a 25% reduction in gross receipts in one quarter in 2020 compared to that same quarter in 2019.

The biggest thing that you need to note in my opinion is that you cannot apply for round 2 funding if you received funds in the first round unless you have a 25% reduction in your gross receipts in a specific quarter in 2o2o and you have to take that quarter in 2020 and compare it to a quarter in 2o19 and make sure that you have a 25% reduction.

Let’s rewind a little bit because I know you are probably like, “Wait…what do I need to do?”

So, you will need to choose a quarter in 2o20, so let’s just say that you look at quarter 3 of 2020, you want to look at your gross receipts (you want to look at your gross revenue, basically.) You will need to run a report and compare your revenue to that same quarter in 2019 and you will need to have a 25% reduction in gross revenue in order to qualify for PPP funds in round 2. So for example quarter 3 in 2o2o has to be compared to quarter 3 in 2019 and you have to show that you had a 25% reduction. To clarify, you can do quarter 3, quarter 2, quarter 1, etc. it doesn’t matter but whatever your quarter is that you are looking at in 2020, you need to look at the data for that same quarter in 2019 and make sure that you had a 25% reduction.

This is why I am always saying how important bookkeeping is because if it is done it makes this process so much simpler. You will be able to quickly run those reports and do a comparison. If you are looking for some help with your bookkeeping, make sure to check out the services we offer!

Note: If you did not receive PPP funds in the first round, then this 25% reduction that I am talking about does not apply to you.

Question #2 is: Can I deduct the expenses that are paid for with PPP funds?

I’m happy to say that in December 2020, the COVID-related Tax Relief Act of 2020 made that answer become “YES!!” and not only is it yes for Round 2 funds, but it also is retroactive to the loans that were given starting in March of 2020. This means that expenses that were paid using the PPP funds you received are tax-deductible! Your payroll, your utilities, and your rent, those expenses that you used your PPP funds for, they can be deducted on your taxes.

So, if you received PPP funds in round 1 and you got forgiveness on that loan or even if you didn’t get forgiveness yet, and you’re working on your taxes or you’re working with your CPA on your taxes, make sure that you’re deducting those expenses. You should not be doing anything to remove those expenses from your income or anything like that, they can be deducted on your tax return. And that will be the same for round 2. When they finally gave us that guidance a few weeks ago, we saw that went retroactive back to the PPP loans that started in March 2020 and the same will follow for the loans that are given in round 2.

Question #3: “Will I be able to get forgiveness on this loan like I did on Round 1 funding?”

The simple answer to that is yes; however, there are of course stipulations just like last time. You’ll need to spend at least 60% of the funds on payroll costs like wages, insurance, and even owner compensation. Make sure you’re following the guidelines on what that other 40% can be used on if you want to seek 100% forgiveness for that loan. But as long as you do that, then yes, you’ll be able to apply for forgiveness and the good news is that it might even be a more simplified process for you this time because there have been major improvements to the forgiveness process for loans that are under $150,000 and right now it looks like the forgiveness application is only one page long, which is amazing. If you received funds in round 1 and your loan was under $150,000 make sure that you’re filling out that new simplified form and that same form will be used in round 2 funding. The really cool thing with forgiveness is if you receive the funds and follow the guidelines, PPP doesn’t really even qualify as a loan…it’s actually a tax-free cash gift which is pretty awesome, right?

So those were the 3 most common questions I have been receiving about PPP round 2.  I hope this was helpful to you! If so, please let me know in the comments! Seriously, nothing makes me happier than to see and hear that the content I’m putting out there is helpful to you. If you have any questions when it comes to PPP, leave a comment and I will try to answer them!

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