Tag Archive for: Paycheck Protection Program

SBA loan underlined words and marker.

On March 27th, 2020, Congress passed the CARES ACT, which included provisions that allowed banks to lend up to $349 billion in the Paycheck Protection Program set up by the Small Business Administration.  The rules have changed several times and are likely to change again.  For the time being, businesses can apply for the SBA PPP program to cover two months of payroll and office expenses.

As our national response continues to shift, there are new resources for small businesses introduced almost every day. The unprecedented number of applicants quickly drained the initial funds set aside for qualifying companies. On April 23rd, 2020, a new bill passed to add additional funding to the SBA PPP. The legislation allocated $310 billion into the PPP to help small businesses during this time of uncertainty.

Holly Wade, the director of research and policy analysis for the National Federation of Independent Business (NFIB), the country’s largest small business association, tells sources she’s heard from countless small business owners with concerns about the application and payout process for the Small Business Administration’s (SBA) Paycheck Protection Program (PPP).

“The list of frustrations is long,” Wade says, noting that many businesses had trouble finding bank lenders to accept their applications, especially if their bank wasn’t participating in the SBA’s program after the application process kicked off at the beginning of April.

Many small businesses across the U.S. that have already been approved for loans, but are still waiting for money to hit their bank accounts. Others are worried that strict guidelines over how they can disburse that money could ultimately do more harm than good to their business.

Ultimately, the decision to apply for one of these loans is up to you. Still, we strongly suggest that you consider evaluating your options and taking advantage of the right opportunity for your business. Need help making that decision? Reach out to one of our representatives today.

For more information on SBA loans and the PPP program, visit our resource page here.

A man working

As the world has been put on an indefinite hold, so too has the IRS.

During prior government closures, the IRS still was able to have essential workers be in federal buildings to process tax returns, sort mail, and process payments. The recent coronavirus pandemic blew that scenario out of the water due to health concerns, spread rate, and social distancing. 90% of US taxpayers e-file their tax returns online, but amended returns, IRS correspondence, and checks all still get postmarked and sent to Ogden, UT on a daily basis.

What was already an extremely outdated and behind the curve federal agency has now become akin to a snail in the race to process, post, and respond to the US taxpayer. Throughout a normal workday, the IRS receives hundreds of thousands of faxes, physical mail, checks, and online submissions, which would usually go through its normal route and receive a realistic response from the IRS. However, these days nobody is in to perform that work. The halls of the federal buildings are empty, so much so, that mail is piling up with no place to go. The IRS has recently started storing taxpayer mail in trailers on federal property due to the constraints of the US post office not being able to hold such large volumes for an indefinite amount of time .

The taxpayer community of 2020 balks at the idea that their IRS correspondence is being stored in a trailer and that someone will have to hand sort thousands of documents, but in reality what other choice was there? The IRS system is 30+ years old, tax representatives still have to fax documents, and IRS employees usually cannot respond to emails, a break in the chain was inevitable. Maybe this pandemic will spark the discussion of where our taxpayer monies should actually be going in the future.

Despite the fact that IRS is looking at a years-long backlog and the imminent need to update internal systems, the volume of tax filing anomalies that will surely occur in the 2020 tax filing season will likely trigger a wave of audits. If you will have vastly different income and debt statements on your 2020 returns, reach out to the team at MTL and have our IRS audit experts review your financials and 2020 tax filings.  A letter of explanation can change the way IRS sees your returns. Our team has defended hundreds of business owners facing IRS audit and helped avoid audit for dozens of other business owners. We are here to help.

With the current coronavirus (COVID-19) pandemic and the California stay-at-home order in place since March 19, 2020, several small California businesses have been forced to close doors. Consequently, hundreds of thousands of workers have been fired or furloughed.

The California Employment Development Department (EDD) has been overwhelmed with claims for unemployment insurance, as the numbers of Californians applying for the benefit increases every day. The receipt of unemployment insurance benefit is a right of California employees and those workers that are classified as independent contractors do not enjoy the same rights.

Nonetheless, on April 20, 2020, the EDD posted a clear invitation for independent contractors to claim they have been misclassified and should have been, in fact, treated as employees, which makes them entitled to several benefits, including, unemployment insurance. But, what does that mean for the businesses that hired those workers as independent contractors? An 100% chance of receiving a payroll tax audit notice from the EDD.

The filing of an unemployment claim by an independent contractor claiming to be, in fact, an employee is the number 1 reason why businesses get audited by the EDD in California. With the EDD encouraging independent contractors to file for unemployment insurance, the number of payroll tax audits will sky-rocket, harming hundreds if not, thousands, of small businesses that are already suffering from the coronavirus (COVID-19) pandemic.

If you own or operate a small business in California that uses/used the services of independent contractors and you have been impacted by the coronavirus (COVID-19) pandemic, you should be aware of the potential risks and consequences of being audited by the EDD for employee misclassification.

At Milikowsky Tax Law, we have the tools, the knowledge and the expertise to first identify the potential risks of an EDD payroll tax audit and guide you through the entire process. Don’t fight the EDD alone, Contact us at 858-450-1040 to discuss your options.

A calculator

From Fox Business to the Wall Street Journal to the Washington Post, all signs point to widespread audits of SBA PPP Loan recipients. 

Despite pressure, publicly held companies in business sectors from hotels to cruise ships are refusing to give back SBA PPP funds.  The SBA has  said that public companies with “substantial market value” and the ability to raise money through capital markets were not the intended recipients of the Small Business Payroll Protection funds.  Those funds, which were depleted by large loans taken by these companies and re-funded last week,  were meant to help small businesses, as the name of the administering agency would suggest. 

Treasury Secretary Steven Mnuchin announced on  Tuesday, April 28th  that the federal government plans to audit all loans over $2 million. The SBA PPP Loans are built to be forgivable if the recipient of the funds uses 75% of those funds to pay payroll costs and the remaining 25% for operating expenses.  The goal, in the midst of the massive unemployment wave is to keep employees on the payroll.

“Anybody that took the money that shouldn’t have taken the money, one, it won’t be forgiven and two, they may be subject to criminal liability, which is a big deal,” Mnuchin said in an interview on Fox Business. “I encourage everybody to look at this and pay back these loans now so we can recycle the money if you made a mistake.”

Shake Shack and Ruth’s Chris Steak House have already announced plans to return their SBA PPP loan funds. As of Wednesday evening, the SBA had approved nearly $90 billion in loans from more than 960,000 applications in the second round.

Businesses whose loans were under the $2m amount mentioned by Mnuchin should take heed. Impeccable financial records will be necessary to ensure loan forgiveness.  Business owners should put SBA PPP funds into a separate account, pay ONLY payroll costs with 75% of the funds and use a spreadsheet or other tool to track where the money goes.  There is almost certain to be a wave of audits as banks, the SBA and the IRS examine the veracity of claims that funds obtained through the SBA PPP were used for payroll and helped companies stay in business during the novel coronavirus pandemic, stay at home order and global economic slowdown.

Woman smiling while using a laptop

It’s safe to say that everyone has been impacted by the COVID-19 pandemic, but small businesses have been hit especially hard by consequential long-term closures and plummeting sales. While it’s important to be creative when cutting costs in times like these, it’s equally pertinent to keep your business aligned with rules set by the IRS and SBA — particularly if you are planning to apply for a PPP or EIDL loan.

As many business owners have laid off or furloughed employees, they’ve turned to independent contractors to finish the work that was left behind. “Gig workers,” as they’re often called, can be an effective way for businesses to stay flexible while on a tightened budget, but contracting them may also disqualify you for certain loans offered by the PPP and EIDL.

Keep in mind that 75% of your EIDL and PPP loans must be used for payroll expenses, which exclude the cost of hiring independent contractors — or anyone filing under a 1099. Understanding 1099 lax loan will serve you well when applying for an SBA loan, but it can also help you avoid paying a fine for AB-5 violations down the road. There are certain exemptions to the law, but you will need to fully understand the definition of an independent contractor and the tax requirements before making the decision to outsource your projects. 

In general, the fine print matters a lot when applying for SBA loans and we recommend that you review your application with a legal professional. Reach out today to schedule a consultation with Milikowsky Tax Attorneys.