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this webinar is about what business owners should know about tpp forgiveness it is organized by two companies infinious and narrating company my name is alec perhalo i'm founder of infineois which is uh an i.t firm here in chicago also known as a outsourced i.t department so forth uh narrating company uh is represented by alex nerit and rochelle uh today um we uh so alex narrating company is obviously a cpa firm uh also our client and also um our cpa and so alex and i were just talking about the other day about ppp and we decided you know why not send it create a webinar and inform my network and his network of clients and colleagues about this important topic so uh they did some research uh to know the topic in in depth and so uh rochelle will present it alex will help throughout and uh alex will also lead the q a at the end please use the q a button for the questions rather than the chat then it's easier to keep track of things rashel take it away thank you for that introduction alec and good afternoon everyone thank you for taking time out of your busy day to join us we hope that after this presentation you will this presentation will demystify the ppp loan forgiveness process for you i assume you're all ppp loan borrowers we've tried to summarize this information as much as possible because we want to leave time for questions from you at the end and a disclaimer that this is general information it doesn't apply to your particular facts and circumstances but we think you'll find it informative and here i'm going to try to share slides with you so here we are what business owners need to know about the ppp loan forgiveness process i'm going to cover three areas i will start by addressing loan forgiveness timeline which includes loan repayment deferral and loan forgiveness application due dates we're going to briefly review some important concepts uh including qualified expenses covered period and limitations and reductions to forgiveness amounts and finally we will describe the three separate loan forgiveness applications only one of which you will have to complete and the documentation requirements for each so the loan forgiveness timeline we're going to talk about deferrals and due dates and note that this will vary for you based on when your loan was disbursed and the covered period that you choose so loan payment deferral ppp loan repayments are deferred until the earlier of 10 months after the end of your chosen covered period or the date the loan forgiveness application process is completed and your lending institution will notify you of that first date so let's put this into perspective the very first ppp loan dispersed was on april 10th 2020 add the eight week covered period that existed at that time plus 10 months so the first loan repayment would be on april 2021 so that's next calendar year so everybody in this audience is still deferring their loan payments if you received one of the later ppp loans i need to point out that the 10 month deferral period will start on december 31st 2020 that's this month at the latest now if a borrower that's you submits a loan forgiveness application to your lender within that 10 month window the borrower will not have to make any principal or interest payments before the date that the sba remits the loan forgiveness to your lender the lender must notify the borrower of the remittance by the sba of the loan forgiven amount and the date the first payment is due in cases where there is not 100 forgiveness interest continues to accrue during the deferment period to the extent that your loan is forgiven the interest associated with it will also be forgiven the interest rate is one percent now uh moving on to the loan forgiveness application due date they will accept your loan forgiveness application up to the maturity of your loan most of you probably have a five-year maturity on your loan if you got a loan earlier you might have a two-year maturity but you could probably agree with your bank to extend that to five years so they're going to be accepting these forgiveness applications for a long time you could even be making payments on your loan then decide to submit your loan forgiveness application once your your lender receives your application they have 60 days to review it then they submit that to the sba and the sba has 90 days to review it so by submitting your loan forgiveness application you're kind of buying an extra you could buy an extra five months of loan deferrals until this is all worked out uh we do want to alert you this is for a reason to delay your loan forgiveness application don't submit it this month wait till next month why there is a possibility that there will be very advantageous changes made to the ppp loan forgiveness process and these changes relate to the tax deductibility of qualified ppp expenses the changes might not be implemented until the after the end of this calendar year and they might not be retroactive therefore leave yourself open to the possibility of more forgiven more favorable ppp forgiveness terms by waiting until next month okay and now i just want to review some key concepts that you used when you applied for your loan because these concepts also apply to how you calculate your forgiveness amount remember only the portion of the ppp loan proceeds that were used to pay for qualified expenses are eligible for forgiveness and the list of eligible uses of loan proceeds is fairly limited you have your um payroll and non-payroll and your payroll consists of your salaries and wages and also the health insurance contributions that you may make on behalf of your employees their retirement contributions and state payroll tax expense the non-payroll items include mortgage interest rent and utilities and i should note that these non-payroll items these obligations need to be enforced before february 15 2020 and we'll touch on that again when we talk about documentation so in order to potentially achieve full forgiveness you must use at least 60 percent of your loan proceeds on payroll now originally this ratio was 75 percent on payroll and 25 on non-payroll the ppp flexibility act changed that that gives you more flexibility to use um your ppp loan on non-payroll expenses however when we get to the next slide you'll see that many borrowers will be able to use just a hundred percent of payroll for their loan forgiveness because of other changes so i've already mentioned your covered payroll period a couple times in this presentation so let's talk about what that is the covered period was originally defined as the eight-week period beginning on the date of the loan disbursement but as a result of the ppp flexibility act that was signed into law on june 5th the covered period was extended to 24 weeks so the borrower now has the flexibility of more time to use their proceeds and potentially entirely on payroll to make the forgiveness application process easier so by virtue of the loan of origination borrowers received two and a half times their 2019 average monthly payroll costs and they now have 24 weeks to spend that so roughly six months to spend two and a half months worth of money and it's it's this is by no means required to use all your loan pre proceeds on payroll costs but it might make your application forgiveness process easier and you'll understand that when we get to documentation regardless of when you received your ppl p loan your covered period cannot extend beyond december 31st of this year so if you received your ppp loan after july 16th you may find that you have fewer than 168 days to pay for qualified expenditures now the alternate covered period is it's just the same it's just that it starts a little later instead of starting on the day you got the loan proceeds it's going to start on the first payroll day after you receive the loan proceeds and this is just helpful for you because it's easier to document you don't have to prorate your first and last payroll you can use whole payroll periods so that's just helpful for you okay we want to remind you of some limitations on qualified expenses and circumstances that can cause a reduction in your loan forgiveness amount you probably remember when you applied that cash compensation eligible for forgiveness may not exceed an annual salary of a hundred thousand dollars per employee as and prorated for your covered period so you could see now that the 24 week covered period is more uh advantageous because you're capped at forty six thousand one hundred and fifty four dollars per employee whereas if you chose the eight week period you have a lower limit um now moving on to the for loan forgiveness amount might be reduced for you if you reduced your employees wages or salaries by more than 25 percent compared with the base period of january first to march 31st 2020 your loan forgiveness amount will also be reduced if you decrease the number of employees that you had and the term used here is full-time equivalent employees and i'm not going to get any deeper into that right now but if you reduced the number of employees that you had there is an exemption and two safe harbors available that might not reduce your loan forgiveness amount so you might still get a hundred percent forgiveness even if you reduce the number of head count but there's there's no exemption or safe harbor if you reduced employees wages one more thing we want to point out to you is that if you received an idle loan advance this advance will be deducted from the amount remitted to the lender upon the sba's final decision on forgiveness so that's that's not good news but and we've made it to the applications there are three separate applications you only have to fill out one of them we're going to start with the easiest these aren't named appropriately because the s is the easiest the easy is the second easiest so let's start with the s who qualifies borrowers who received a total ppp loan amount that was less than fifty thousand dollars and together with all their affiliates received ppp loans of less than two million dollars are eligible to use this form the great thing about this form and it is a really great thing is that the forgiveness calculation is exempt from any reductions due to a reduction of wager salary or full-time equivalent employees so that's kind of big that makes this form very easy it requires the least amount of documentation because you don't have any comparison periods because they don't care if you reduce something in comparison to before the pandemic or not so that's the best one if if you don't qualify for the 3508 s let's see if you qualify for the 3508 ez there's three groups of him of borrowers who qualify if yourself a self-employed individual an independent contractor or sole proprietor and you have no employees you can use the 3508 ez or if you're a borrower who did not reduce salaries or wages or full-time equivalent employees head count you can use the 3508 ez and the last group are borrowers that were unable to operate during the covet period at the same level of business activity as before february 15 2020 due to compliance with covet requirements and guidance for example restaurants so the 3508 ez is a good one to use but if you don't qualify for that one either you're going to be using the form 3508 long form but that's just the way it goes so let's talk about documentation for each of these before we open this up to a question and answer everyone regardless of which form you use you should retain all your records relating to your ppp loan for six years after the date the loan is forgiven or repaid in full now all three forgiveness application forms require that you submit the following for your covered period now remember the covered period is just the period that you chose that you got the loan it doesn't include these comparison periods that i was talking about so that makes i'm saying that this is kind of easy you submit the payroll reports if you have a third party payroll provider they're getting very good at producing these reports for you you'll have to gather a documentation supporting the fact that you paid for employees health insurance retirement contributions and state payroll tax expense and any non-payroll expenses that you want to include mortgage interest rent and utilities and this is where i want to mention again that those obligations needed to be in effect february of 2020 so before all of this happened they want to make sure that you already have those in place that you didn't just create them as a way to spend these loan proceeds and of course you'll have to have those expenses for your covered period those statements to show that you made those expense you made those payments during the covered period and this last documentation requirement is kind of the most complex but if you use the 3508 s form you don't have to document this and you don't even have to retain documentation you're exempt from that requirement if you fill out the 3508 ez you just need to retain the documentation that shows that you did not reduce the number of full-time employees between january 1st 2020 and the end of your covered period now again if you're using a third-party payroll service they are getting pretty good at developing these reports that should make that easier for you to document but you just have to retain them you're not going to have to submit those to your bank now if you're using the 3508 long form you're going to show all these calculations on your form and you're going to submit that documentation to your bank um and your peer your comparison periods are a little different here it's not january 1st 2020 to the end of your covered period you're going to submit documentation on your head count during your covered period and then the comparison period of your choice the one that's most beneficial to you that could be february 15th to june 30th 2019 or january 1st to february that that should have been february 29th 2020 that's a typo sorry about that okay so in conclusion you need to contact your ppp lender and complete the correct form you're going to compile your documentation you're not going to submit this until the new year that was our recommendation uh they say that you should continue to communicate with your lender throughout the process and don't forget to retain your ppp documentation for six years okay and that concludes the presentation portion of this webinar we'll now open it up to you for questions so yeah if anybody has a question you can just chat in the in the box to ask the question or use the q a or just let me know in the chat and i'll allow you to talk within the platform so you can just speak and ask somebody's asking will we be sharing this presentation yes yes uh we will send the pdf uh slides to everybody who attended along with the recording if somebody likes video better but i i had i had some questions too i mean luckily i have uh alex team here to help me uh being our cpa you know but um what is uh do you guys help with this i mean do you i mean just i guess it's not uh so much a question but nfy right i know that i'll just give alex my okay and he'll fill out all the forms and do everything for me but okay so we have more questions coming in is ppp alone considered income i saw an article in tribune that iras determined it had it is an income so first of all i want to say thank you to rochelle for such a detailed presentation thank you for everybody attending our webinar and let me address this question so according to um ppp guidelines after loan is forgiven it's not considered to be income but according to irs regulations if you have non-taxable income the funds that you spend on qualified expenses will not be deductible so basically even though it's uh non-taxable revenue but because you're not allowed to take deductions it becomes taxable income that's why we recommend to wait until january of 2021 see if congress will uh make changes with um to deductibility of qualified expenses which was their original intention but internal revenue service interpreted differently and uh that's where you are that's where we are at this moment go ahead okay can you see those questions can uh or do no i can see them so another question what would be utility expenses it would be electric bill gas bill transportation expense telephone expense um internet expense basic service for internet that would uh comprise of utility expense that those are the categories uh bella reznikov is asking your recommendation for medical office which form out of three should be filled out what's uh basically relates to what rachel went through has nothing to do with type of business more has to do with the rules that apply if you received uh more than fifty thousand dollars and probably you did uh you probably would have to go with form easy and uh in your environment you probably retain all your workers or they were not able to work because of uh poet restrictions you probably will qualify for that form okay and uh we also have some questions coming in through chat when do you expect an answer on ppp loan if ppp loan will be treated as income yeah so yeah so when when do you expect to know whether it's going to be trita's income we don't know but there is a conversation going through which we aware of through illinois cpa society and there is a bipartisan support on both sides of the aisle democrats and republicans are agree that items should be deductible will it go through congress and be passed we don't know yet but that's why we're waiting for uh we're asking you not to apply at this moment and uh it might be even that you might have to file an extension on your tax returns to see if you're qualified uh the basically file an extension the best case scenario worst case scenario you will be right on a computation under old rules but then if expense become deductible it's only win-win for you so there is no definite time frame at this moment um if you have if you have eligible payroll cost let's say 500k for 24 weeks then then it's it's i don't think this question is written can you see this uh alex can you look in the chat at 12 52 there was a question about uh 500k for 24 weeks i i see that one i think i understand what they're asking so the only thing the only expenses that would be disqualified as deductible would be the ones that you submitted for your loan forgiveness so the 250 in your question so the the question was if i have 500 000 of um payroll in my 24 week period but my loan is only 250 000 which expenses would be disallowed as deductible and it would only be the ones that were part of your loan forgiveness so the 250. um there's more coming in for the eligible cause yeah let me get this one um there is a question if there's going to be if there's any talk about uh total forgiveness without filing any forms i would imagine uh that's out of the question that's why they created form f 3508 s for situations than any loans under fifty thousand dollars basically automatically forgiven if you take a look at that form it basically asks you for company name addresses id number email phone number amount of the loan and amount spent on qualified expenses and there's nothing else there so this is your way out for loans under uh fifty thousand dollars originally there was a kind of talk about having that for loans under 150 000 but that did not materialize and at this moment we didn't hear anything else on a topic hopefully maybe it will be part of this discussion in congress uh just like uh discussion about disability and there's one question that i have to promote real quick jim meltzer being a client asking can he use infinuous bills for phone and computers as expenses for ppp okay you would have to use it partially so internet service that you would pay for getting internet yet and uh computer services no but phones is a phone service and a telephone service yes definitely yeah so there's another question uh it's any idea how much time it will take for confirmation that loan was forgiven once i applied i still need to start making payments and decisions not been made the answer is uh uh so from the time you received money you have 24 weeks which is called covered period after cover period you have another 10 months to apply if you apply during that 10 months period there's not gonna you're not making any payments of principal or interest also if you apply that time period any approved interest will be forgiven too if you go beyond that time frame and apply after 10 months you have to start making payments of principal and interest and loan could still be forgiven but not the portion that you already paid back and i think once you apply theoretically you could be buying yourself five say you apply right before you 10 months ends then the application process starts more deferral and it takes them time to process it like the the bank gets 60 days to process it the sba gets 90 days so that's another potential five months deferral yes potential but uh we have already a few clients applied and we're forgiven in a shorter period of time it's from start to finish 30 days with one client and with another client was around 40 days but what's interesting both clients are not in state of illinois uh and they dealt with smaller banks so for some reason smaller banks process the applications faster so another thing that uh nobody asked a question but you should be aware of uh larger banks like bank of america or chase and pnc not even started wrong statements they began to take some application but it's not open to everybody so they invite people to apply but uh uh not everybody can do it yet their websites are not working properly and uh on those with larger institutions you have to apply online smaller banks like park ridge community bank or uh belmont bank you have to apply with a manual application which is actually very simple you can fill it out in pdf format and submit it and then bank employees will process it on their end and and turn it over to sba okay let's see what we haven't really have any more it's getting a little sporadic yeah we have questions coming in both uh chat and q a uh are there still talks about ppp loan forgiveness across the board without completing any forms or providing documentation yeah i took i answered that one also uh our friend from texas just asked a question if there's going to be any expense that may be logged into in 2021 are there any expectation of pp loan changes the only change that we're talking about uh would be forgiveness deductibility apart maybe under new administration after integration there will be a second uh [Music] another ppp program available but even if even if that will take place it probably will be targeted to certain industries certain businesses like travel uh entertainment restaurants uh salons uh businesses are suffered more than the other ones so it will be more targeted that's probably one of the things that might take place i'm still unclear about greg is asking i'm still unclear about which date will be the measuring period for full-time employees if we got the loan about as early as possible what date should they be looking at to measure ftes at the end of the loan so let's make an example of a date let's say uh he received it on april 15. what's what's the period end that he should be looking at i can start and alex can finish answering that one but um if you don't think that you had a head count reduction you need to you and you can file on the 3508 ez it just says that you need to maintain your fte documentation from january 1st to the end of your covered period so if you maintain your your fte um that's what you need but if you're on the long form you have different measurement periods that you can choose from alex do you want to clarify or anything no you're absolutely right but a reduction in employees is also has to be more than 25 percent so if there is a reduction of less of uh that it's you have to you have to basically go through uh um forms and see which one you apply but maybe the question was when do you have to time to apply so if you received it on le as uh was mentioned april 15 and then you have 24 weeks in a covered period and then you have 10 months that was another way of answering uh let me let me i'm new i don't know greg if you want to speak and see if we answered it correctly to a satisfaction i know did we understand the question properly or not you may unmute yourself and just explain and the fpe is the most complex part of this so it's a good question from greg so maybe yeah i mean so maybe grant can call us directly we will be able to answer a question on one on one this way there's not going to be any missing information because this is a more complicated question which probably involves more information if we need to answer it correctly yeah let's let's do it that way uh greg has you know you'll have in all of all of the attendees will have all of uh uh narrating companies uh information so you can ask the questions via email later as well no microphone he said no microphone to respond it's okay i think you addressed my point so looks like we took care of that one uh do you see anything else we haven't covered in chat or q a i just want to say one more thing to somebody who had a reduction in workforce that there are some exemptions and safe harbors so maybe you'll still get the 100 forgiveness there was another question about if only payroll could be used to substantiate qualified expenses yet with a 24 week period it makes it easier for employers to substantiate dollar amount with payroll and all you have to provide is the payroll reports provided by you to you by payroll service or if you're using uh quickbooks uh you can generate report yourself it just has to be signed by a third party if your cpa or accounting firm that you use for payroll services that's the another issue we accounted with one of our clients that's using uh quickbooks for payroll and uh chase actually in this instance asked for a sign layer that was prepared by third-party uh so this way they know that it was a solid uh report not so it was a real deal um alina wexler is asking about form 3805 ez if it's for any amount after 50 000 it's not just the amount that that counts that that determines which form should be used because there's three forms easy is the middle form right the most simple form is below 50 000 whatever is above 50 000 there's two different forms uh one of them is easy but there are other conditions which you guys probably want to talk about so alina uh probably in your case we uh the form 2508 easy needs to be used uh and there's no reduction in in employees uh you should be fine with using that particular form anybody any other i have a question um if let's say i was doing this forgiveness myself without your help i mean guidelines provide information about what documents support documents don't need but they're not very clear they're saying what's the wording they use retain the communication to prove or provide a communication to prove that you have fts but what is uh legitimate documentation what if i don't use a third-party company and i just use intuit payroll and uh you know that's how the payroll is done what's considered to be legitimate so uh so if your form 1941 payroll tax according payroll tax report is signed by a third party like a cpa that would be acceptable we already had that situation and bank accept that form so in many instances it could be different from bing to bank it's about it's all about their comfort level bigger bank maybe have a more restrictive rules and uh more check marks uh you need to go jump through more hoops but at the same time bigger banks will have a website where you answer questions questions related how you spend money what you spend money on and they will lead you to the proper form but go back to your question if your 941 is signed by cpa that would be acceptable as the third party okay i think we covered all the questions pretty much [Music] just uh fyi everybody we will be sending the recording of this webinar as well as all slides of the presentation to everybody who attended again uh my name is alec i'm co-founder of infineo is local i.t firm and i'm with narrating company represented by alex nerit founder and rachel plant the accountant tax specialist i at this point i want to say goodbye and thank you for coming over we will be doing more webinars on uh other important topics so keep an eye on your inbox and thanks [Music] again you