If this is accurate, it could be very educational. I was discussing these "loans" with my Dad who owns a business with a lot of employees and was worried that he was taking on debt. He explained to my relief that a great deal of the loan would be forgiven.
Not being a business owner and having to know the details of the program, I had assumed that these were merely favorable interest rates. Seems like the politicians could have branded this program better. It sounded on the surface like they were just loading up small businesses with more debt.
They are definitely favorable conditions, you get the loan at 1% interest and are eligible for forgiveness of up to 100% of the loan if you use it on certain types of expenses. Also, payments are deferred until after the initial period is up (June 30th). Overall a very positive program.
By making the funds loans, they also were able to quickly disburse them by using the existing legions of SBA lenders.
Though getting a loan through a big bank was neigh impossible. My fiancée's company banks with Wells Fargo and they didn't even get the application (after applying to get an application) until the first round of funds were gone. Thankfully they then applied with several smaller banks and was able to get one from with the new funding.
I think that unfortunately this heavily depended on your bank. Wells Fargo really dropped the ball, but Bank of America was one of the first banks to accept applications and therefore disburse money. We used a regional bank whom we had an existing relationship with and it went pretty smoothly, better than if we had tried with WF.
This implies that they screwed up and they might deserve forgiveness. They had no intention of lending PPP funds except for large preferred accounts they wanted to help.
Not defending Wells Fargo at all, but they were also limited due to restrictions placed on them for some of their criminal activity and therefore had a limited pool to lend with for PPP.
Amazing work! This seems like a great way to clear up uncertainty around these loans.
It's worth clarifying that (unless Congress changes something), loan forgiveness counts as a taxable event. Meaning a business would have to pay income tax on the amount of the loan that was forgiven, typically at the time it's forgiven. This could be preferable to paying the loan, but might require taking on a new (smaller) loan to cover the tax liability.
Thanks for the kind words! There certainly is uncertainty around these loans. We wanted to make it super simple to estimate how much you could get forgiven, given what we currently know from the law itself and the SBA guidance.
Actually the CARES Act states loan forgiveness is not taxable (Act §1106(i)) [1], but also prevents businesses from then taking a deduction for expenses paid with the money (so no double benefit).
Maybe I'm wrong about this, but the wording on the site makes it seem like those who make over $100,000 are exempt from forgiveness entirely, but it was my understanding that the are covered, just not beyond $100,000. So you can pay someone over the $100k annualized threshold, it just won't add to the amount forgiven. So the single person cap is effectively $16,666 (($100k/12)*2).
The SBA may release more guidance but as of now payroll costs over $100k are not included in the calculation of the eligible loan amount. They have not been excluded from forgiveness.
However, the forgiveness penalties for reductions of more than 25% in wages/salary for employees does not apply to employees making over $100k.
If you are self employed and no employees how does the payroll section work?
For example, I don't have a fixed payroll. I am setup as a single member LLC (disregarded-entity) and just transfer money from the business checking into my personal checking when appropriate. No formal payroll solution.
From my reading of the interim rules, it's based on your 2019 Schedule C Line 31 (Total Profit and Loss), capped at 100k.
For forgiveness it's: ($100,000 / 52 weeks) * 8 weeks = $15,384. The rules and new clarifications seem to change every week, I'd consult a CPA before assuming anything.
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[ 3.0 ms ] story [ 44.3 ms ] threadNot being a business owner and having to know the details of the program, I had assumed that these were merely favorable interest rates. Seems like the politicians could have branded this program better. It sounded on the surface like they were just loading up small businesses with more debt.
By making the funds loans, they also were able to quickly disburse them by using the existing legions of SBA lenders.
This implies that they screwed up and they might deserve forgiveness. They had no intention of lending PPP funds except for large preferred accounts they wanted to help.
It's worth clarifying that (unless Congress changes something), loan forgiveness counts as a taxable event. Meaning a business would have to pay income tax on the amount of the loan that was forgiven, typically at the time it's forgiven. This could be preferable to paying the loan, but might require taking on a new (smaller) loan to cover the tax liability.
[1] - https://www.congress.gov/116/bills/hr748/BILLS-116hr748eas.p...
Am I wrong?
However, the forgiveness penalties for reductions of more than 25% in wages/salary for employees does not apply to employees making over $100k.
For example, I don't have a fixed payroll. I am setup as a single member LLC (disregarded-entity) and just transfer money from the business checking into my personal checking when appropriate. No formal payroll solution.
For forgiveness it's: ($100,000 / 52 weeks) * 8 weeks = $15,384. The rules and new clarifications seem to change every week, I'd consult a CPA before assuming anything.
Therefore: ($100,000 / 52 weeks) * 10 weeks = $19,230.