Understand how to effectively model and forecast for your business during COVID-19. This week's livestream covers current scenarios so you can plan effectively. We'll also provide an update on economic relief programs.
- Jennifer Rohen, Principal, CLA
- Kelsey Vatsaas, Principal, CLA
- Jennifer Witts, BizOps Chief Financial Officer, CLA
- Rick Krueger, Principal, CLA
In case you missed it:
Questions and Answers:
Are FTE and salary/wage reductions based off total spend or total loan amount? Or do the reductions come off the loan amount regardless of total spend?
We believe they are based off eligible spend.
A few weeks ago the delay of posting July 15 IRS payments was discussed. As of today, my July 15th payment for 2019 has not yet cleared. Is this still a problem with other clients? What is CLA’s recommendation?
Yes, the IRS is still very backlogged. We absolutely recommend that you be patient and wait for them to clear their backlog. Also, please maintain receipt of timely payment.
Can you please confirm the timeframe to use for the following owner compensation question: Is this all qualified payroll expenses for the 8-weeks (what we’re using), including the pro-rating?
- 8-week window: 4/13/2020 – 6/7/2020
- Payroll: Monthly at end-of-month
You could use payroll that was incurred prior to and paid during 4/13 and then payroll that was incurred through 6/7 and paid on the next pay period. You will need to prorate the last payroll for the days incurred within the covered period.
When do you recognize the PPP loan forgiveness as income if you are on accrual basis? Do you estimate the forgiveness portion in the 2020 return even if it is forgiven in 2021?
We recommend you wait until it is forgiven in 2021. Here is an article on the topic. For tax purposes, you are not required to pick it up until forgiven: https://www.claconnect.com/resources/articles/2020/stimulus-relief-dollars-accounting-and-financial-reporting-considerations
What is the likelihood that there will be some sort of agreement on the blanket forgiveness of loans under $150,000? Is it safe to assume that this $150,000 threshold will be applied on a cumulative basis for companies with common ownership?
This is getting less likely the longer Congress takes to get a second relief bill through. It was looking promising that we would have a second bill in August and September but as we get closer to the end of September, this becomes less promising. Secondly, aggregation of companies with common ownership is recommended.
For reporting debt forgiveness as taxable income: will it be required that the SBA sign off on forgiveness in 2020 for the related expenses used for forgiveness to be “nondeductible” in 2020? Or will the taxpayer have the option of reporting the nondeductible expenses earlier (2020) if the forgiveness request is submitted in 2020 and not approved until 2021?
We don’t know the exact answer to this. We don’t have any clients that have wanted to accelerate the income. Most clients are attempting a deferral strategy. Since the income is not triggered until forgiven, IRC 265 does not kick in to disallow the deduction until that point in time. I would not recommend accelerating the disallowance. The best case scenario of course would be that we get a technical correction that fixes this such that the expense deduction ultimately gets allowed. However, again, the more time that goes by with no movement from Congress, the less optimistic we become!