Pandemic Recovery Series: Bonus SessionPresented by: Amy Knight, CPA

8.11.20

Disclaimer• This presentation and related materials are designed only to provide general

information regarding the subject matter discussed during this presentation. The statutes, authorities, and other laws cited in this presentation are subject to change.

• This presentation and related materials are not intended to provide tax, accounting, legal, or other professional advice to any specific person or entity. Any advice or opinions regarding the application of the subject matter for a specific person or entity should be provided by a competent professional advisor based on an application of the appropriate law and authorities to the facts and circumstances applicable to that person or entity.

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Pandemic Recovery Serieshttp://www.hc-link.com/pandemic-recovery-webinar-series

• Session 1 (7.2.20)• Navigating the Economic Incentives

• Session 2 (7.9.20)• Promoting Agency Success with Emergency Preparedness Plans, Infection Control,

and Quality Programs• Session 3 (7.16.20)

• Identifying Operational Efficiencies During Pandemic Recovery• Session 4 (7.23.20)

• Getting Prepared for the Next Round, Financial Considerations

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Pandemic Recovery Series

• Session 5 (7.30.20)• FFCRA – Emergency Paid Sick Leave & Expanded Family Medical Leave

• Session 6 (8.6.20)• Legal Aspects of Pandemic Recovery

• Bonus Session (8.11.20)• PPP Loan Forgiveness – Form 3508EZ Application Training

• Session 7 (8.13.20)• Addressing Pandemic Psychosocial Impacts While Rebuilding Agency Operations

• Session 8 (8.20.20)• Optimizing External Opportunities for Agency Growth and Expansion

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Agenda: Bonus Session• Introductions• Review eligibility requirements for Form 3508EZ – PPP Loan Forgiveness

Application• Form 3508EZ line by line review• Overview of the covered costs: payroll & non payroll• Discuss required documentation• Q&A – please post questions in the Q&A panel

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Eligibility Requirementsfor Form 3508EZ

Amy Knight, CPAKnight CPA Group

• There are 3 questions to determine if you qualify to file the EZ Form of the forgiveness application.

• Must be able to answer YES to one of the following 3 options

1. Borrower is:• self-employed, • independent contractor, • sole proprietor who had no employees at time of application & did not include employee

wages in the computation of average monthly payroll in the application

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Eligibility Requirements – Option 1

2. Borrower did not reduce annual salary or hourly wages more than 25% during covered period compared to the period between Jan 1, 2020 and Mar 31, 2020 – excluding wages above $100,000 annualized

AND

Borrower did not reduce number of employees or average paid hours of employees between Jan, 1 2020 and the end of the covered period.

Exceptions apply!

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Eligibility Requirements – Option 2

Exceptions to the second aspect of #2 (reduction in number of employees)

• Ignore reductions that arose from an inability to rehire individuals who were employees on Feb 15, 2020 if the Borrower was unable to hire similarly qualified employees for unfilled positions on or before Dec 31, 2020.

• Ignore reductions in an employee’s hours that the Borrower offered to restore and employee refused

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Eligibility Requirements – Option 2 exceptions

3. Borrower did not reduce annual salary or hourly wages more than 25% during covered period compared to the period between Jan 1, 2020 and Mar 31, 2020 – excluding wages above $100,000 annualized

AND

Borrower was unable to operate during the Covered Period at the same level of business activity as before Feb 15, 2020 due to compliance with requirements established or guidance issued between Mar 1, 2020 and Dec 31, 2020 by HHS, CDC, OSHA….. or any other work or customer safety requirement related to COVID-19

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Eligibility Requirements – Option 3

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Eligibility Requirements Per Instructions

• If you cannot answer YES to at least one of those questions previously discussed, you are not eligible to use SBA Form 3508EZ and instead must use SBA Form 3508

• Forms and instructions can be found on the Treasury.gov website, link below:

https://home.treasury.gov/policy-issues/cares/assistance-for-small-businesses

• If you want to go to this link, you can download the form and follow along

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Eligibility Requirements

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Online Resources

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Online Resources

Form 3508EZ Line by Line

Amy Knight, CPAKnight CPA Group

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Form 3508EZ Line by Line

• SBA PPP Loan Number: this information will be on your loan documents, not all banks will provide this automatically. You may have to ask your bank for it.

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Form 3508EZ Line by Line

• Lender PPP Loan Number & Loan Amount: this information will be on your loan documents.

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Form 3508EZ Line by Line

• PPP Loan Disbursement Date: This is the day that the funds actually deposited into your checking account. • This is NOT the date on the loan document• This is NOT the date that the bank actually credited your loan account at the bank

• Number of Employees at time of the loan application• Actual employee count, not FTE calculation

• Number of Employees at time of forgiveness application• Actual employee count, not FTE calculation

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Form 3508EZ Line by Line

• EIDL Advance Amount: If you applied for and received the $1,000 per employee up to $10,000 you must report the amount received. Your forgiveness will be reduced by this amount.

• EIDL Application Number: If you applied for and received an EIDL Loan, not just the Advance, your loan document will have your application number in the top right corner.

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Form 3508EZ Line by Line

• Payroll Schedule: How often is your payroll paid to the employees:• Weekly• Biweekly = every other week, i.e. every other Friday• Twice per month, i.e. the 15th and end of the month• Monthly• Other – need to explain

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Form 3508EZ Line by Line

• Covered Period is either:

1. The 24-week (168-day) period beginning on the date your loan funds were deposited into your checking account.

2. If your loan was received prior to June 5, 2020, you may elect to use an eight-week (56-day) period beginning on the date your loan funds were deposited into your checking account.

In no event can the Covered Period extend beyond December 31, 2020

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Form 3508EZ Line by Line

• Alternative Payroll Covered Period is either:

1. The 24-week (168-day) period beginning on the first day of the first pay period after the loan funds were deposited into your checking account.

2. If your loan was received prior to June 5, 2020, you may elect to use an eight-week (56-day) period beginning on the first day of the first pay period after the loan funds were deposited into your checking account.

Only eligible to Weekly or Biweekly payroll schedulesYou cannot use the alternative Payroll Covered Period on any non-payroll costsIn no event can the Covered Period extend beyond December 31, 2020

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Form 3508EZ Line by Line

• Loan Amounts over $2 Million:

• If the Borrower, together with its affiliates (to the extent required under SBA’s interim final rule on affiliates and not waived under 15 USC 636(a)(36)(D)(iv)), received PPP loans in excess of $2 million – check the box

• According to the SBA’s FAQs, Question #39 – the SBA will review all loans in excess of $2 million, in addition to other loans as appropriate, following the lender’s submission of the borrower’s loan forgiveness application. Additional guidance implementing this procedure will be forthcoming. **Mnuchin says these loans will get a full audit to make sure they’re valid….

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Form 3508EZ Line by Line

• Loan Amounts over $2 Million:

• If the Borrower, together with its affiliates (to the extent required under SBA’s interim final rule on affiliates and not waived under 15 USC 636(a)(36)(D)(iv)), received PPP loans in excess of $2 million – check the box

• According to the SBA’s FAQs, Question #39 – the SBA will review all loans in excess of $2 million, in addition to other loans as appropriate, following the lender’s submission of the borrower’s loan forgiveness application. Additional guidance implementing this procedure will be forthcoming. **Mnuchin says these loans will get a full audit to make sure they’re valid….

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Form 3508EZ Line by Line

Polling Question 1

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• Payroll & Nonpayroll Costs:

• Line 1 – Payroll Costs

• Line 2 – Business Mortgage Interest Payments

• Line 3 – Business Rent or Lease Payments

• Line 4 – Business Utility Payments

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Form 3508EZ Line by Line

• Potential Forgiveness Amounts:

• Line 5 – Add amounts on line 1 through 4

• Line 6 – PPP Loan Amount

• Line 7 – Payroll Cost 60% Requirement (divide Line 1 by 0.60)

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Form 3508EZ Line by Line

• Forgiveness Amount:

• Line 8 – Forgiveness Amount (enter the smallest of Lines 5, 6, and 7)

• Forgiveness is then reduced by the amount of EIDL Advance received, dollar for dollar

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Form 3508EZ Line by Line

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Form 3508EZ Example 1

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Form 3508EZ Example 2

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Covered Costs: Payroll & Non payroll

Amy Knight, CPAKnight CPA Group

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Line 1: Eligible Payroll Costs

• Compensation: • Gross salary, gross wages, gross tips, gross commissions• Paid leave: vacation, family, medical or sick leave not including leave covered under FFCRA

(emergency paid sick leave or expanded family medical leave)• Does not include wages in excess of $100,000 annualize per employee

• Eight-week period max is $15,385• 24-week period max is $46,154• If you use less than 24 weeks but more than 8, we are told this will be the weekly rate of $1,923

multiplied by the total weeks used to spend the funds• Must be paid to employees who were employed during the covered period• Must be paid to employees whose primary residence is within the US

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Line 1: Eligible Payroll Costs• Employee Benefits, total amount paid by Borrower for:

• Employer contributions for employee health insurance, excluding pre-tax or post-tax contributions by employees• Do not include employer health insurance contributions made on behalf of self-employed

individual, general partners or owner-employees of an S-Corp – these payments are already included in compensation (if reported correctly)

• Employer contributions to employee retirement plans, excluding pre-tax or post-tax contributions by employees• Do not add employer retirement contributions made on behalf of self-employed individual,

general partners – these payments are already included in compensation• Contributions on behalf of owner-employees are capped at 2.5 months’ worth of 2019

contribution amount• Employer state and local taxes paid by the borrower and assessed on employee

compensation, excluding taxes withheld from employee: i.e. state unemployment tax

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Owner’s Compensation Cap

• Owner-employees, a self-employed individual, or general partners:

• Eight-week period is capped at 8/52 of 2019 compensation (up to $15,835)

• 24-week period is capped at 2.5-month equivalent of their applicable compensation in 2019 or $20,833 (the 2.5-month equivalent of $100,000 per year) whichever is lower

• If you use less than 24 weeks but more than 8, we are told this will be the weekly rate of $1,923 multiplied by the total weeks used to spend the funds

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Eligible Non Payroll Costs• Line 2: Business mortgage interest payments

• Include payments paid or incurred during covered period• Any mortgage obligation on real or personal property incurred before Feb 15, 2020• Do not include prepayments

• Line 3: Business rent or lease payments • Include payments paid or incurred during covered period• Any lease agreement in force before Feb 15, 2020

• Line 4: Business utility payments• Include payments paid or incurred during covered period• Any utilities for which service began before Feb 15, 2020• Includes: electricity, gas, water, telephone, trash/sewage, transportation, internet

All of the above are optional, do not report payments that you do not want to include in the forgiveness amount

Polling Question 2

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Required Documentation

Amy Knight, CPAKnight CPA Group

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Documentation for Payroll Costs• Bank statements or third-party payroll service provider reports

documenting the amount of compensation paid to employees

• Tax forms (or equivalent third-payroll payroll service provider reports)• Payroll Tax Filings reported, or to be reported, to the IRS. Typically Form 941• State quarterly business and individual employee wage reporting, unemployment tax filings

• Payment receipts, cancelled checks or account statements showing the amount of any employer contributions to health insurance and retirement plans included

• If you checked only the 2nd box on page one, the average FTE count on Jan 1, 2020 and end of the Covered Period

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Documentation for Non Payroll Costs• Business mortgage interest payments

• Copy of lender amortization schedules and receipts or cancelled checks verifying payments • Or lender account statements from Feb 2020 through one month after Covered Period

• Business rent or lease payments • Copy of current lease agreement and receipts or cancelled checks verifying payments• Or lessor account statements from Feb 2020 through one month after Covered Period

• Business utility payments• Copy of invoices from Feb 2020 and those paid during the Covered Period and cancelled

checks• Or account statements verifying those eligible payments

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Documentation to be Maintained • The following is additional documentation that is required to be

maintained but not submitted with the forgiveness application:

• Documentation that annual salaries/hourly wages were not reduced by more than 25% to include payroll records by employee for the two periods (Jan 1 – Mar 31 vs Covered Period)

• Documentation of employee job offers and refusals, refusals to accept restoration in hours, firings and cause, voluntary resignations, written requests by any employee for reduction in work schedule, inability to hire similarly qualified staff – all on or before Dec 31, 2020

• Documentation that Borrower did not reduce number of employees or the average paid hours of employees between Jan 1 and end of Covered Period – unless exception applies. Must include payroll records by employee from Jan 1 through end of Covered Period

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Documentation to be Maintained • The following is additional documentation that is required to be

maintained but not submitted with the forgiveness application:

• Documentation that Borrower was unable to operate between Feb 15 and end of the Covered Period at the same level of business activity as before Feb 15 due to compliance requirements established or guidance issued between Mar 1 and Dec 31, 2020 by HHS, CDC, OSHA, related to COVID-19. Must include copies of the applicable requirements for each location and relevant borrower financial records.

• All records relating to the Borrower’s PPP loan, including documentation submitted with its PPP loan application, docs supporting all certifications made as to the necessity and eligibility of the loan, docs supporting the forgiveness application, docs demonstrating the Borrower’s material compliance with the PPP requirements.

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Documentation to be Maintained

• The Borrower must:

• Retain all the previous documentation for 6 years after the date the loan is forgiven or repaid in full

• Permit SBA representatives or OIG access to such files upon request

We’re here to help• We are always available to assist agencies with consulting and advisory

services, but especially through this public health emergency

• Visit our website:• Knight CPA Group www.knightcpagroup.com

• Contact us directly:• Knight CPA Group 512.249.8342 amy@knightcpagroup.com

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Pandemic Recovery Series: Next Event• Knight CPA Group, HealthCare ConsultLink, and DLA Piper thank you for

attending today’s webinar

• Session 7 (8.13.20)• Addressing Pandemic Psychosocial Impacts While Rebuilding Agency Operations

• For registration support, call 888.258.1894 or email info@hc-link.com

• Visit the webinar series website for more detailed information: http://www.hc-link.com/pandemic-recovery-webinar-series

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Questions??

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