COVID-19 Resource Center

April 10, 2020

Webinar Recap: How the Paycheck Protection Program Affects Small Business Owners

On Wednesday April 8th, WendroffCPA Partnered with Atlantic Union Bank to host a webinar on the Small Business Administration Paycheck Protection Program and answer questions from business owners.

You can get access to the recorded webinar here:

And access to the presentation slides here:

Webinar Slides: Small Business and Self Employed Strategies for the Paycheck Protection Program

Some questions that were answered include:

Question: Since I just started my self-employed consulting practice and have had close to zero work so far, am I eligible for any benefits?

You had to have started your business by 2/15/20, and you can rely on 1/1/20 to 2/29/20 income to base calculation on. For you it is probably better to collect Collect unemployment.

Question: What is the latest guidance on forgiveness calculations? Especially since current active workers have gone down due to loss of business that most likely will not come back in 8 weeks due to stay at home orders and virus is still expanding.

Well, the treasury is asking for last year’s payroll information. You can use this and the number of current employees you have at the beginning of the year, or before the layoffs began. You could always give back the money if you did not use it for payroll.

Question: I have only 5 employees and am wondering if I can apply for the Paycheck Protection Act to protect myself in case any of my employee get sick and cannot bill. I do not have a lot of funds in reserves. In other words, I’m not currently impacted by the virus — can I still apply?

On point 1, if you are not being affected, then it may not be worth applying for. We don’t know how treasury is going to audit this if you are not affected and took money out. You may have to give it back if your revenue did not change from 2019 to 2020. At this time, if you don’t see your company being affected it may be worth skipping the first round of loans, and wait if another stimulus plan comes up and if you need to apply for it in the future.

Question: Do payments to independent contractors (through UpWork) count as ‘payroll’ costs? How are they treated?

No, they can apply on their own.

Question: What documentation is needed to file for the Paycheck Protection Program

For companies with employees, usually last year’s payroll info and benefit costs and the profit for the owner’s who are Sch C or 1065s either from a Sch C or K1. For SCorps, then just the payroll info and benefits from last year. For independent contractors or 1065s WITHOUT employees, then Sch C and K1s and benefit costs.

Question: What records to keep? (Should some expenses in QBO be classified differently in order to meet reporting requirements?)

Payroll info for records, the expenses can be revised to report payroll, benefits, etc. to be used for the reconciliation. You can spend the loan on very specific expenses. Ask your bank about what they need specifcially. We know banks at least need payroll records, expense documents for benefits, the SBA application, etc.

Question: Can an estate executor apply for the SBA loan through the CARES act since the court is closed?

Not if there is no business or not-for-profit involved.

Question: What is needed for a 1099/Independent Contractor to apply?

f you are self-employed and have NO employees, you are allowed to apply on 4/10. We suggest providing a Schedule C from 2019 or an Profit and Loss Report showing your Income. If your income is over 100k, then all you can get from this loan is $20,833 ($100k/12*2.5). If you don’t have a Schedule C for last year, or a profit and loss report, you could use a form 1099 and use this as your base for the calculation. A 1099 though can be misleading since this just shows your gross revenue Before expenses. If you had expenses, such as paying an accountant, bank fees, supplies, etc, then this information (revenue from the 1099 minus expenses) seems to be more accurate to calculate the loan.

Question: Should I apply for this for my employees or have them file for unemployment?

It depends. If you can employ your staff to work, then the PPP makes sense, because even if you have to release them in 2 months, as long as PPP loans is used for payroll, then you tried to employ them. If you cannot employ them work, then they need to file for unemployment.

Question: How does a partnership account for guaranteed payments and profit for PPP calculation?

Yes, we feel guaranteed payments are like payroll, and at this point the treasury hasn’t provided final guidance. It is capped at 100k. So if the partner received both guaranteed payments and income from the K1, it would be capped at 100k. The other partners with no GP and just profit would use their K1 income if they are materially participating. They can also include health and retirement costs.

Question: What program(s) does a startup company with little revenue qualify?

You can use payroll for 2019 or 2020 if you just started to get loan money.

Question: Does CARES apply to government consulting small businesses with active government contracts?

Yes, for sure. It affects all biz who is under 500 employees

Question: 1) If my LLC files a 1065 and delivers k1’s for 2 members, should I fill out one PPP application for the LLC, or two for each member? Should I list the application type as “partnership”, “sole proprietor”, or something else?
2) If I distribute the funds to the members in the above example, does that satisfy the requirements for the loan to be forgiven? What evidence of distribution do I need to provide?
3) How does applying for an EIDO advance of $10,000 effect applying for PPP if you have not yet received the funds?
4) If I have not yet filed for 2019, can I simply use my 1099 in the above example to illustrate income for 2019?

You can file one application and put any owners owning 20% or more on the one app. Treasury says this. Show it as partnership. Yes, as long as you can say the money was used to 75% of the payroll, which means owner’s distributions, then it seems you are fine. If you not received the 10k as of this time, I don’t think I would put this on the application. If you do get it in the future, then you need to have this money as part of the loan money to calculate paying staff 75% of the money. If you have not filed your 2019 return, we are thinking you would provide financials or at the least the 1099. the 1099 though can be misleading since this is gross pay, and you have other expenses to calculate net income/pay, which we think is what needs to be used to calculate the amount to be loaned.

Question: How do you infer from the CARE Act that the purpose of applying to the PPP a sole proprietor with no employees can declare payroll costs as income (net profit) per line 31 of Schedule C

Since you are using a Sch C, or 1099 showing you existed last year, then the loan can be given. You just have to show distributions as your payroll. This is all based if you existed as a business in the prior year and made income. And if you started in 2020, you will have to prove you made money as a sole prop.

Question: I am an independent arbitrator and expert witness. For purposes of the PPA it would seem that I am an independent contractor, a sole proprietor, and a self-employed individual. For self-employed, the form says “eligible” self- employed. Does that limit me in some fashion? Thanks very much

No, Sch C, P&L, 1099s, retirement and health info. yes, 1099s can apply. Capped at 100k

Question: We are an LLC with 7 doctor partners that receive partnership distributions through 1099 income. When filing individually for self-employed PPP, what do they put as number of employees? How do they calculate the maximum loan amount? What expense can be forgiven as a “self-employed partner”, since their LLC is filing for the PPP for their employees?

If you get a 1099, then this is only for you. Pust just 1 employee.No, Sch C, P&L, 1099s, retirement and health info. yes, 1099s can apply. Capped at 100k.

Question: I am a partner in three partner LLC management/training consulting firm, each owns 33 1/3%. We take monthly draws against our annual income which varies for each partner between $120,000 – $130,000 for each partner. We have one half-time employee Office manager. Questions: 1. Paycheck protection program asks for proof of payroll, but we take draws, does this qualify, if so, what forms do we submit? 2. PPP talks about employees, but we only have the half-time employee, our three partners are all full-time. I have had four anticipated contracts either cancelled, postponed or are under amendment due to CV 19, which will result in my losing over half of the income I personally expected to earn between end-March and mid-June. So CV 19 has affected our income as partners, does this qualify for the PPP? Thank you.

Show K1s from 2018 or 2019, Yes, K1 income will be used to show pay capped at 100k, and show benefits as well.

Wendroff & Associates has a special program to help business owners calculate their loan amount, apply for the PPP loan and discuss the parameters to make sure you get the loan forgiven. This is a 3 hour consult, and the fee is $500. If you would like to set up a consult, please click on the button below.

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