SBA Payroll Protection Program: Assistance Through the Forgiveness Process

02 Oct SBA Payroll Protection Program: Assistance Through the Forgiveness Process

Back in March, it seemed as if we were never going to get to this point. Our worlds were filled with a pandemic, quarantines, layoffs, executive orders, school closings, stimulus checks, increased unemployment benefits, and cancellations. But most of all it was filled with questions. Questions that Fuller Lowenberg tirelessly tried to answer for each and every one of our clients, with the focus being on the Payroll Protection Program (“PPP”). And while it seems that we’ve answered every question there could possibly be regarding SBA Payroll Protection Program Loans, there is still one left: What do we do now?

While the PPP has provided you with much-needed funding during these uncertain times, we also know that it has provided its fair share of aggravation and anxiety over the last few months. That is why we are here now, at this crucial point, to help alleviate some of that stress. Although many financial institutions are still not yet accepting PPP Loan Forgiveness applications and businesses have until 10 months following the end of their covered period to submit for forgiveness, now might be the time to start preparing for the next step.

We recognize that every client is different and with that comes different needs and assistance as it relates to the PPP Loan Forgiveness process. That is why in addition to setting up a specialized PPP department within our firm, we are offering the option of one of two services for us to provide to you during the forgiveness process.

Option 1: PPP Forgiveness Application Preparation Engagement

• Client provides Fuller Lowenberg with backup of all documentation required to substantiate the use of the PPP eligible funds.
• Based on the information provided, Fuller Lowenberg will prepare the necessary forgiveness application form (3508 or 3508EZ).
• Fuller Lowenberg will provide a draft version of the form to the client along with a list of the documentation that needs to be submitted with the application.
• Responsibility for submission of the loan forgiveness application to the applicable financial institution will be that of you, the client.

Option 2: PPP Forgiveness Application Review Service

• Client provides Fuller Lowenberg with a copy of their prepared draft of the necessary forgiveness application form (3508 or 3508EZ) as well as backup of all documentation required to substantiate the use of the PPP eligible funds.
• Based on the information provided, Fuller Lowenberg will review the application, check the client’s work and agree the amounts per the documentation to that of the forgiveness form.
• Fuller Lowenberg will provide any questions, comments, or possible revisions to the client for review and response so as to maximize client’s loan forgiveness.
• Responsibility for submission of the loan forgiveness application to the applicable financial institution will be that of you, the client.

Regardless of what service you intend to engage Fuller Lowenberg for, we recommend taking the following next steps on your path to forgiveness:

• Contact your Fuller Lowenberg partner to inform him/her of the intended service you wish to engage us for.
• Complete the electronic version of the engagement letter if you wish to have FL assist you: Click Here for Engagement Letter
• Complete the disbursement of all PPP Loan funds before the end of your covered period (8 weeks or 24 weeks).
• Gather all documentation to support payroll and non-payroll costs for allowable expenses. Please see the AICPA recommended forgiveness documentation below.
• Once FL receives your engagement letter, a secure folder will be set up within your ShareFile account. All documents should then be uploaded here once the package is ready to be reviewed. Documents should not be uploaded piecemeal. Instead, once all documents have been gathered, upload them all at once.

Please be aware that there could still be clarification issued by the SBA on additional aspects of the forgiveness process. Questions still exist on automatic forgiveness of loans under a certain threshold, tax deductibility of eligible forgiven expenses as well as other items. As further guidance is released, we will continue to update our clients on all of the necessary details.

Forgiveness Documentation

While different lenders may require certain documentation, the American Institute of Certified Public Accountants (“AICPA”) has made the following recommendations for the minimum documents to be prepared and submitted with the application:

Documentation for Employers

1. Payroll Tax Reports – IRS Forms 941, state unemployment tax returns (NYS-45) that include the covered period. If the borrower contracts with a payroll provider or Professional Employer Organization (PEO), they will be able to supply you with most of the documents needed.
2. Compensation and FTEs – In general, payroll reports which will include the following:
   1. Gross wages for each employee for the following:
      1. During the 8 or 24 week covered period
      2. During the most recent full quarter before the 8-week or 24-week covered period
   2. Identifying employees who during any period in 2019, received an annualized pay of more than $100k and also employees whose principal place of residence is outside the U.S (if any)
   3. State unemployment taxes paid during the covered period
   4. The average number of full-time equivalents (FTEs) per month for the following:
      1. During the 8 or 24 week covered period
      2. Feb. 15 through June 30, 2019 or
      3. Jan. 1 through Feb. 29, 2020
   5. For seasonal businesses, use average number of FTEs per month during the period February 15, 2019 through June 30, 2019. (Your third-party payroll service provider will be able to supply you with most of these reports)
3. Group Health Care Benefits – Documentation showing total costs paid for all health care benefits, including insurance premiums paid by the organization under a group health plan. Include all employees and company owners during the covered period.
4. Retirement Plan Benefits – Documentation showing the sum of all retirement plan funding costs paid by the organization during the covered period. Include funding for all employees and the company owners.
5. Other Documentation – Canceled checks, receipts, account statements or other documentation of payment for other eligible costs incurred and paid during the covered period such as mortgage interest, lease payments and utility payments.

Documentation for Sole Proprietors, Independent Contractors and Self-Employed Individuals

1. The 2019 Form 1040 Schedule C to verify net income for owner income replacement calculation.
2. If you have employees, provide payroll documentation as outlined above, including documentation of healthcare and retirement benefits costs. Exclude owner from healthcare and retirement costs. (Your third-party payroll service provider will be able to supply you with this report)
3. Canceled checks, receipts, account statements or other documentation of payment for other eligible costs incurred and paid during the covered period such as mortgage interest, lease payments and utility payments.