PPP borrowers can use gross income, SBA rules

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March 14, 2021

PPP borrowers can use gross income, SBA rules The U.S. Small Business Administration (SBA) issuED new Paycheck Protection Program (PPP) rules that allow self-employED individuals who file Form 1040, SchEDule C, Profit or Loss From Business, to calculate their maximum lOAn amount using gross income instead of net profit. The change opens the door for […]

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PPP borrowers can use gross ncome, SBA rules

The Small Busness Admnstraton (SBA) ssued new Paycheck Protecton Program (PPP) rules that allow self-employed ndvduals who fle Form 1040, Schedule C, Proft or Loss From Busness, to calculate ther maxmum loan amount usng gross ncome nstead of net proft.

The change opens the door for larger loans to self-employed ndvduals, many of whom don’t record much, f any, net proft on ther Schedule C.

The calculaton change s detaled n a 32-page interim final rule publshed late Wednesday afternoon by the SBA, whch admnsters the PPP n partnershp wth Treasury. The SBA also released an d set of frequently asked questions and sx d or new applcaton forms, as follows.

ACPA leaders wll dscuss the SBA gudance, new forms and FAQs durng an online Town Hall that wll start at 3 p.m. ET Thursday.

The nterm fnal rule, ttled “Busness Loan Program Temporary Changes; Paycheck Protecton Program — Revsons to Loan Amount Calculaton and Elgblty,” revses the maxmum loan calculatons for sole propretors who fle Schedule C returns, but the change s not retroactve. The SBA and Treasury have ruled that borrowers whose PPP loans already have been approved cannot ncrease ther loan amount based on the new methodology.

The new FR allows a Schedule C fler who has yet to be approved for a PPP frst- or second-draw loan n the , $284.5 bllon phase of the program to elect to calculate the owner compensaton share of ts payroll costs based on ether net proft (as reported on lne 31 of Schedule C) or gross ncome (as reported on lne 7 of Schedule C).

f a Schedule C fler has employees, the borrower may elect to calculate the owner compensaton share of ts payroll costs based on ether net proft or gross ncome mnus expenses reported on lnes 14 (employee beneft programs), 19 (penson and proft-sharng plans), and 26 (wages (less employt credts)) of Schedule C. f a Schedule C fler has no employees, the borrower may smply choose to calculate ts loan amount based on ether net proft or gross ncome.

The FR provdes dfferent sets of maxmum loan calculaton nstructons for Schedule C flers wth no employees (see pages 10–11 of the PDF) and wth employees (see pages 11–13). These borrowers may use ther PPP proceeds to cover the followng:

To mtgate the rsk of fraud, a Schedule C fler that reports more than $150,000 gross ncome to calculate ts frst-draw PPP loan wll not be able to clam the safe harbor provded for borrowers that, together wth ther afflates, receved PPP loans of less than $2 mllon. The SBA sad t s elmnatng the loan necessty safe harbor for these borrowers because they may be more lkely to have other avalable sources of lqudty to support ther busness’s operatons than Schedule C flers wth lower levels of gross ncome.

The SBA wll revew a sample of the populaton of frst draw PPP loans made to Schedule C flers usng the gross ncome calculaton f the gross ncome on the Schedule C used to calculated the borrower’s loan amount exceeds the $150,000 threshold. The revew wll assess whether these borrowers compled wth the PPP elgblty crtera, ncludng the good fath loan necessty certfcaton.

The FR also mpleted d elgblty rules to remove restrctons preventng PPP loans gong to small busness owners wth pror nonfraud felony convctons or who are delnquent or n default on federal student loan payts. These changes are reflected on the d PPP borrower forms for frst and second draws.

The SBA gudance and forms release came a day after the AICPA called on Congress to extend the PPP applcaton perod by at least 60 days due to ongong process delays and the need for tme to mplet the promsed loan calculaton gudance  

ACPA experts dscuss the latest on the PPP and other small busness ad programs durng a vrtual town hall held every other week, ncludng March 4 at 3 p.m. ET. The webcasts, whch provde CPE credt, are free to ACPA members and $39.99 for nonmembers. Go to the AICPA Town Hall Series webpage for more nformaton and to regster.

The AICPA’s Paycheck Protection Program Resources page houses resources and produced by the ACPA to help address the economc mpact of the coronavrus.

Accountng frms can are and process applcatons for the PPP on the CPA Business Funding Portal, created by the ACPA, CPA.com, and fntech partner Bz2Credt.

For more news and reportng on the coronavrus and how CPAs can handle challenges related to the outbreak, vst the JofA’s coronavirus resources page or subscribe to our email alerts for breakng PPP news.

Jeff Drew (Jeff.Drew@aicpa-cima.com) s a JofA senor edtor.


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PPP borrowers can use gross income, SBA rules The U.S. Small Business Administration (SBA) issuED new Paycheck Protection Program (PPP) rules that allow self-employED individuals who file FORM 1040, SchEDule C, Profit or Loss From Business, to calculate their maximum loan amount using gross income instead of net profit. The change opens the door for […]

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How To Really REALIZE DREAMS COME TRUE?

Happiness is for those who plan well and pursue. A profound among us have been proven those who have true dream to live for likely REALIZED IT. It is just simply the person working toward the DREAM days and night until accomplishment. There is a phrase of efficiency a head of you. Steps and obstacles at first seem tremendous. However, just with some times those difficult steps and challenges are so easy performance for you. There are also plenty of tools including VISUALIZATIONS and helps are around you.

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COVID-19
HOW TO DEFEAT DEADLY CORONAVIRUS EVERY TIME?

The Greatest Virus Surviving 10 Steps Guide

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Please Order If See Anything You Need? Mutual Reciprocal & Have Great Days!

 

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