Loan funds from the Paycheck Protection Program are expected to ramp back up with an additional $310 billion to be approved by the House within the next few days.

Business owners who’ve missed the first round of funding, here’s what to do next:
  • Have your application ready. Unsure of exactly how much you qualify for? Check out the payroll protection calculator on Ark Academy we designed, aimed to show you exactly how much funds your business should apply for from the Small Business Administration.
  • As we observed with presumably round one of funding, local and community banks were able to approve more loan applications versus larger traditional lenders. It may be advisable to look for community lenders or active lenders within the SBA network.
  • Economic Injury Disaster Loans are also expecting to be replenished with an additional $10 billion to be funded. A step by step breakdown of the process can be found here.

The Employee Retention Credit applies to qualified wages paid after March 12, 2020, and before January 1, 2021. The maximum amount of qualified wages taken into account with respect to each employee for all calendar quarters is $10,000, so that the maximum credit for an Eligible Employer for qualified wages paid to any employee is $5,000.

If you get funding, what’s next?

Create a separate account for loan funds: that way paying your employees, allocating a small amount towards mortgage interest or rent, and most importantly filing for loan forgiveness will be streamlined as opposed to intertwining loan money within your normal business checking accounts.

Onto the forgiveness piece.

In order for Paycheck Protection Loans to be forgiven:
  • 75% must be used on payroll costs.
  • Funds must be used within 8 weeks from when the bank processes funding
  • Up to 25% of funds allocated to mortgage interest and rent

 

In addition to funding:

*Regardless if you received loan funds, losses can also be carried back. For tax years starting after December 31, 2017 and before January 1, 2021, the CARES Act provisions allow you to carry back 100% of these NOL’s to the prior five tax years. That’s 3 calendar years of losses that you incurred in 2018, 2019, or 2020

Losses that are carried back are carried to the earliest of the tax years to which the loss may be carried first.*

If you want, you can waive the carryback, and can elect to carry NOLs forward to subsequent tax years. This needs to be closely considered.

In Notice 2020-26, the IRS grants a six-month extension of time to file IRS Form 1045 or Form 1139 with respect to the carryback of an NOL that arose in any taxable year that began during calendar year 2018 and that ended on or before June 30, 2019. Individuals, trusts, and estates should file Form 1045. Corporations should file Form 1139.

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