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California CPA To Help With PPP Loans + Tax Issues

Our California accountants can help you file for a PPP loan correctly and avoid potential tax issues down the line. Call our CPAs today.

The Paycheck Protection Program (also referred to as PPP), a main feature of the CARES Act passed in March 2020, is intended to be a stimulus for small businesses. Funded by the Small Business Administration, it’s a program that offers small businesses loans so they can continue to provide employees with payroll and cover other necessary business costs as the world goes through an economically uncertain time.

PPP loans can be a major source of relief for small business owners across the United States. If you are a small business owner, know that you can use the help of an experienced accountant to apply for a PPP loan, make sure you adhere to the conditions of the loan, and avoid any tax issues that may arise. For help with your PPP loan, get in touch with California accounting firm Cook CPA to discuss getting relief for your small business. 

Understanding the Paycheck Protection Program

The Paycheck Protection Program is meant to provide relief for small businesses by helping them with loans and other necessary costs for running their businesses. The following is information you can use to apply and adhere to the conditions of a loan through the PPP.

How to Know If You’re Eligible for PPP

To be eligible for a PPP loan, the business must meet the size requirement to be considered a small business, which means that it was 500 employees or less. The small business must also show that they have been negatively impacted by the novel coronavirus, which they can do by certifying that their loan request is necessary due to economic uncertainty on their application.

What PPP Loans Can Be Used For

Loans given to small businesses through the Paycheck Protection Program must be used to go towards specific business costs. The main purpose of a PPP loan is to cover payroll, which includes employees’ salaries, wages, commission, and tips (capped at $100,000); employee benefits including vacation, parental leave, family leave, medical leave, and sick leave, separation or dismissal allowance, payment for insurance premiums, and retirement benefit payments; and state and local taxes on compensation. (For sole proprietors and independent contractors, payroll costs are wages, commissions, income, and net earnings from self-employment, also capped at $100,000 on an annualized basis.)

PPP loans can also be used to pay for mortgage obligations that were incurred before February 15, 2020, rent and lease agreements that went into effect before February 15, 220, and utilities for services that began before February 15, 2020.

How to Apply for PPP

PPP loans are administered by lenders that have been approved by the Small Business Administration. You can apply for a PPP loan through any SBA-approved lender (there are 1,800 approved lenders in the United States and more will be available once they are approved to participate in the program) or through a federally insured depository institution, Farm Credit System institution, or federally insured credit union. You can find a PPP loan lender by using the lender search tool provided by the SBA.

As you apply for a PPP loan, be wary of scammers that are trying to take advantage of small business owners. Make sure that you only apply for a PPP loan by first going to the SBA website. If a lender asks you for your Social Security number, bank account information, or credit card information, it is likely that it is a scam.

How PPP Loans and Loan Forgiveness Works

If you keep all of your employees or rehire them by June 30, 2020, the loan you receive though PPP could be forgiven. Also, for a PPP loan to be forgiven, 75% or more of your approved loan amount but be used for payroll costs. Loan forgiveness won’t happen until the eight-week period of employment following issuance of your loan has ended. To request forgiveness from your lender, you must do so in writing, including documentation of the number of full-time employees your small business has, your pay rates, your payments on mortgages and leases, and payments made on utilities. Your lender will reply within 60 days. To increase your chances of receiving loan forgiveness, it’s recommended that you work with an experienced tax accountant.

How the Paycheck Protection Program is Different From the Economic Injury Disaster Loan Program

The Paycheck Protection Program is only one of two programs intended to help small businesses as they deal with the coronavirus pandemic—the other is the Economic Injury Disaster Loan (EIDL) program. While they’re both meant to help small businesses, they have slightly different goals. The Paycheck Protection Program provides business with loans as part of a stimulus package. The Economic Injury Disaster Loan program existed before the coronavirus became a global economic issue; it has traditionally been meant for declared disasters such as hurricanes and fires but can be used during a pandemic as well. It includes an automatically forgiven advance of $10,000. Businesses should note that it is possible to qualify for loans through both PPP and EIDL.

California CPA For PPP Loans for Small Businesses

Don’t waste any time getting relief for your small business. Apply for a PPP loan so you can keep your hard-working employees and continue to offer the goods and services that are valuable to your community.