Payroll Protection Act: Missouri Businesses.

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We have discovered from communication with the SBA and local banks that this loan will be processed by local small business bankers.  At this time the local banks are still trying to sort through the Payroll Protection Program process and work out the lending application/funding details.  As is the case with most government programs, the concepts are passed at a very high level, and the details are left to be sorted out.  Some local banks are saying they can take the paperwork, others are saying they are still working on this.  Our suggestion is to communicate directly with your small business banker and work with them on preparing the paperwork they may require.  


Our office is collecting information in real-time from local bankers and trying to provide as much guidance as possible to our clients.
Again, at this time, our guidance is to communicate with your small business banker, gather documents and fill out the forms they may have available so that you are ready to file the loan documents.  

Possible Application Materials:
Applications must include documentation verifying the number of full-time equivalent employees on payroll and pay rates including:

  • Payroll costs (including paid sick, medical, vacation family and costs related to the continuation of group health care benefits during periods of leave)
  • Employee salaries, wage commission or other similar compensation, cash or tip
  • Payments of interest on any mortgage obligation, not including prepayment or payment of principal on a mortgage obligation
  • Allowance for dismissal or separation
  • Payment of any retirement benefit
  • Payment of State or local tax assessed on the compensation of employees
  • Rent (including rent under a lease agreement)
  • Utilities (distribution of electricity, gas, water, transportation, telephone or internet access)

Thank you,
—
Jeremy Klaven, CPA

#1 First Missouri Center, Suite 214

St. Louis, MO 63141

cell: (314) 583-6515

office: (314)720-8686

fax: (314) 754-9967

www.saintlouistaxprep.com

CARES Act Offers Assistance. Read.

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As of March 27, 2020, at 1:30 pm the House of Representatives passed the most recent stimulus package called the CARES Act.  The bill now goes to the President’s desk for signature.  


Included in the bill is a payroll loan which in many cases will be forgivable, either 100% forgivable or portions of the loan will be forgivable.  After careful review, we believe that any small business that qualifies for this loan and is currently operating, maintaining payroll and even potentially those that do not have payroll but are self-employed should consider applying for the loan immediately.  For those businesses that have let their workforce go during this time, we ask that you call our office; we believe it is in your best interest to apply for this loan as well. 


Paycheck Protection Program
The loan should be originated at the SBA website or with your local business banker, please reference Paycheck Protection Program when applying for your loan.  Our office cannot originate the loan for you.  If you do not have a business banker you work with we can put you in contact with local bankers that we have relationships with.  The loan value per business is approximately the average of your monthly payroll multiplied by 2.5.  So if your average monthly payroll is $40,000 you would be eligible for a loan of  $100,000.  There are some adjustments that the SBA may make to this loan amount during the loan process.  Loans can be used to pay for rent, payroll, utilities, and operations of the business. The forgiveness is based on maintaining payroll levels through June 30, 2020.  The period of forgiveness is for payroll paid from April 1, 2020 – June 30, 2020.  Borrowers will complete a loan forgiveness application with the bank or SBA at the end of the period.

Additional Forgiveness Details
Borrowers are eligible for forgiveness of indebtedness on a covered 7(a) loan in an amount (the “Forgivable Amount”) equal to the following costs incurred during the 8-week period after the origination of the loan:  payroll costs, payment of interest on mortgages entered into before February 15, 2020, payment on any rent under leases entered into before February 15, 2020, and payments for utility services that began before February 15, 2020. The total amount forgiven can be up to, but not exceeding, the principal amount of the loan.

Loan forgiveness may be reduced based on a reduction of employees or a reduction in employee pay.

Reduction of Forgivable Amount based on reduction of employees: For reduction of employees, to determine the amount actually forgiven, the Forgivable Amount will be multiplied by a fraction, the numerator of which is the number of full-time equivalents employed during the 8-week period after loan origination, and the denominator of which is the number of full-time equivalents employed during one of the following periods chosen by the applicant: (a) the period beginning February 15, 2019, and ending June 30, 2019, and (b) the period beginning January 1, 2020, and ending February 29, 2020. Note that seasonal employers must choose the period described in clause (a).

  • Consider this example for a company with average monthly employment of 100 employees: if the potentially Forgivable Amount is $1 million but the borrower’s average monthly employment for the year prior to application is reduced from 100 to 75 during the 8-week period, then only $750,000 is eligible to be forgiven (25% reduction in workforce = a 25% reduction in loan forgiveness). All principal of the loan in excess of $750,000 would have to be repaid by the Borrower.

Reduction of Forgivable Amount based on reduction in pay: With respect to a reduction of employee pay, for each employee making not more than $100,000 in annualized salary or wages who has their pay reduced during the 8-week period after loan origination, the Forgivable Amount will be reduced by the amount the reduction exceeds 25% of the employee’s pay for the quarter most recently completed prior to loan origination. These amounts are in addition to the reduction for the reduction of employees.

  • Consider this example for the same company as above:  If the company retained 25 employees but reduced their pay by 30% as compared to the most recent quarter, then the Forgivable Amount would be reduced by 5% (i.e., 30% – 25%) of each affected employee’s annual salary. If the salary of each of those employees had been $100,000, then the Forgivable Amount would be reduced by $125,000 (25 employees times $100,000 times 5%). When added to the $250,000 reduction noted above for reduction in force, the Forgivable Amount would be reduced by a total of $375,000. All principal of the loan in excess of $625,000 would have to be repaid by the borrower.

At this time if you file just a 1040 and you have no employees, you do qualify for the loan, but we have not received clarity on your forgiveness options, even then the loan is 3.75% interest payable over 10 years.  This loan should be considered for self-employed individuals with no payroll that otherwise need funds.  As this solution is more cost and tax-effective than accessing investment or retirement funds.


We continue to collect more information as it becomes available and will provide that information either through direct communication with our clients or through our webpage.


Please understand that our office is operating short staff with employees working from home or taking care of children out of school.  We will do our best to reply to the loan document request as quickly as possible and provide assistance in completing loan applications whenever possible.  Thank you,
—
Jeremy Klaven, CPA#1 First Missouri Center, Suite 214St. Louis, MO 63141

cell: (314) 583-6515

office: (314) 720-8686

fax: (314) 754-9967

www.saintlouistaxprep.com

SBA Coronavirus Disease (COVID-19) Relief Loans

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There is likely to be a significant backlog so apply as soon as possible if needed – use this link  https://www.sba.gov/funding-programs/disaster-assistance

 There is some leg work, but the repayment terms are business-friendly.

 These loans are for working capital and not to expand or refinance existing debt. They may be used to pay fixed debts, payroll, rent, accounts payable and other bills that can’t be paid because of the disaster’s impact.

 Loans of up to $2 million

 The interest rate is 3.75% for small businesses without credit available elsewhere; businesses with credit available elsewhere are not eligible. The interest rate for non-profits is 2.75%.

 SBA offers loans with long-term repayments in order to keep payments affordable, up to a maximum of 30 years. Terms are determined on a case-by-case basis, based upon each borrower’s ability to repay.

They are administered directly through the SBA and not your local bank.

On a case by case basis, loans offered under this program may have a forgiveness clause as a feature and the forgiveness will likely be tied to the portion allocated to payroll. Forgiveness is likely to be reduced by the amount of payroll cut.

 I HIGHLY recommend that you fill out the forms completely. Taking your time to make sure that everything is filled out properly will do wonders to make sure that your loan is processed promptly. Rushing these forms will likely cause significantly more delays. It is worth it to fill everything out properly.  

Small business must show an ability to repay the loan based on the 2019 financial statements

Illinois, Arkansas, and the following counties in Missouri are currently eligible: Cape Girardeau, Clark, Jefferson, Lewis, Lincoln, Marion, Mississippi, Perry, Pike, Ralls, Saint Charles, Saint Louis, Saint Louis City, Sainte Genevieve, Scott

The loan program is for operating companies only and not real estate investment or other passive investments

Anyone that owns 20% or greater will have to guaranty the loan. If nobody owns greater than 20% then someone will have to guaranty the loan.

SBA Credit Elsewhere Test Applies. This typically means that if a guarantor or the business has greater cash and marketable securities on their personal financial statement than the loan request then they may be considered ineligible.

SBA’s traditional size standards do apply. This is a Tangible Net Worth of less than $15 Million and an average profit over the previous 2 years of less than 5 Million. This does include the applicant company and any affiliates. The SBA defines an affiliate as any company that anyone that owns 20% or greater in the applicant company also owns 20% or greater in another company.
—
Jeremy Klaven, CPA#1 First Missouri Center, Suite 214St. Louis, MO 63141cell: (314) 583-6515office: (314)720-8686fax: (314) 754-9967www.saintlouistaxprep.com

Coronavirus and Taxes Update.

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First of all, we hope that everyone is safe, healthy, and their families and friends are doing the same.  We extend our gratitude to the healthcare workers, nurses, doctors, techs, clerks, laboratories, etc that have put their own health aside to make sure America is safe.  As a husband of a nurse, I understand first hand the sacrifice that these individuals make not just during times like these, but every day they go to work.  These are the true heroes during this time of crisis, and my family and all of America owes a debt of gratitude to all of those civic servants.


We have had a number of updates in a short period of time.  We would like to provide a bullet point list of important updates, how to find more information out about those updates and what we are looking for next from the federal and state governments.

  • The Tax deadline was moved to July 15, 2020.  This is great news. Previously the administration had pushed back the tax payment deadline but the filing deadline remained on April 15, 2020.  The pushing back of the tax deadline allows for tax prepares and their staff to work from home, take care of the family when needed, and take the necessary time to respond to clients needs that extend beyond filing a return (such as:  understanding the various bills being passed, and lending options for small business).  For our firm, last week we sent home or support staff and asked them to work from home.  Brad and I remain in the office, but that could change this afternoon pending St. Louis County’s decision on non-essential businesses.  If the county mandates a shelter in place we will continue to work from home and be available via phone or email.
  • State Tax deadline – Three days ago the state of MO followed the Federal government request and pushed back on the payment deadline.  At this time the filing deadline remains April 15, but we feel in a matter of hours or days the state will announce that the filing deadline is pushed back to July 15, 2020.
  • Sick Leave and Family Leave are available through employer payments for those employees out sick.  If you are an employee with questions related to this matter please speak with your HR department or a business owner.  If questions remain after that we are here to answer your questions.  If you are a business owner and require guidance on how this impacts your business we ask that you call our office.  We do plan very shortly to have a webinar that covers these updates in detail for all our business owners, but we are waiting for clarity on some details in the legislation before holding that.  Please call our office or email if you have additional questions.
  • SBA Loans – as of Friday 2:30 pm CST, small business loans are available through the SBA.  There will be loan requirements, document requests, etc that are needed during the application process.  We are available and willing to help provide these documents.  Please understand that we are currently getting multiple requests for documents and are responding to each.  We will respond to all document requests within 48 hours.
  • Next Steps from the Federal Government  – As of March 21, 2020, the Senate and House are locked in the chamber, working on another stimulus bill.  We have heard that this specific bill is meant to address industry and small businesses.  The bill will have help for travel, hotel, airline, restaurant, and entertainment industry.  We expect the bill will address small business owners who are experiencing a lack of revenue or been closed due to government-mandated COVID-19 response.  We have heard rumors of payroll loans for 6 to 8 weeks, and repayment terms extending years or allowing total forgiveness.  All of this is speculation, but what it does mean, or what we hope it means is that by Monday or Tuesday of next week real relief would be on paper for small business owners.

Please be on the lookout for our next update which will be coming tomorrow afternoon or evening.

Stay safe, stay healthy, stay positive, and stay in.

Thank you,
––
Jeremy Klaven, CPA

#1 First Missouri Center, Suite 214

St. Louis, MO 63141

cell: (314) 583-6515

office: (314)720-8686

fax: (314) 754-9967

www.saintlouistaxprep.com