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Tom Neff, CPA , Tax Stockholder,  International Tax Chair and Chairman of the Board in Oakland.
Tom NeffCPA / Tax Partner / International Tax Co-Chair / Managing Partnerview bio

Howard Zangwill, CPA, Managing Director of Audit and Accounting in the Oakland office.
Howard ZangwillCPA / Managing Director of Audit and Accountingview bio

Richard Dellefave, CPA / Principal in the RINA San Francisco office.
Richard DelleFaveCPA / Principalview bio

Chelsea MaemoriCPA / Audit Supervisorview bio

Answers to the Unanswered Questions

Answers to the questions not address before time ran out at the January 19 PPP webinar

1/25/2021

Followup to the  PPP Round 2 Webinar

(revised 2/1/2021)
RINA presented details about PPP Round 2 and the Employee Retention Credit in a January 19th webinar. The panelists answered many questions asked during by attendees, but they were unable to get through all of those submitted by participants. (Please listen to a recording of presentation in our video library.)

RINA is happy to respond below to questions asked which we were not able to answer during the webinar.

  1. Will it cover credit card processing costs? 
    These are eligible for forgiveness under Operations Expenses – payments for any business software or cloud computing service for business operations, product or service delivery, the processing, payment, or tracking of payroll expenses, human resources, sales and billing functions, or accounting or tracking of supplies, inventory, records, and expenses.
     
  2. May a cash basis taxpayer applying for PPP round 2 use the accrual method to calculate the quarterly revenue reduction of 25% or more? 
    No – this is not allowed.  While borrowers may use either cash basis accounting or accrual basis accounting to calculate revenues and make calculations, the interim final rule says this:
    gross receipts to include all revenue in whatever form received or accrued (in accordance with the entity’s accounting method).
     
  3. When you state that expenses such as lost inventory in a restaurant are covered, does that need to be included in 40% or is it on top?
    Like the first draw PPP, a second draw borrower must use at least 60% of the PPP proceeds for payroll expenses, and no more than 40% of the proceeds for non-payroll expenses.  Lost inventory is an eligible cost assuming it is not covered by insurance.  However, Property damage costs related to vandalism or looting due to public disturbances that occurred during 2020, not covered by insurance or other compensation are covered as forgivable eligible expenses.
     
  4. For single owner LLC, can we use the ERC for last year for non-PPP months?  
    Yes – if you had a 50% reduction in gross income 2020 vs. 2019.
     
  5. Can we use any quarter's revenue in 2019 vs 2020 to figure the 25% decline?  
    Yes, you can.
     
  6. When I applied for PP1 I had 3 employees. In August I had to let go of an employee.  Can I still file for the PP2 with 2 employees? 
    Yes – if you can show a 25% reduction in gross revenue in any quarter or annually ‐ 2020 compared to 2019.
     
  7. Is it still possible to apply for the EIDL for round one?
    Yes – you can apply here:
    https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/covid-19-economic-injury-disaster-loans
     
  8. But I can apply for PPP for the first time in this round, correct?  It’s not just for folks that already got one in round 1? 
    Yes – if you meet the eligibility, this PPP round is open to new borrowers in addition to those who have already used their first PPP loan.
     
  9. We have applied for PP2 already, but don't know result. How do I avoid taking ERC only to find out I was approved in PP2, making those covered wages ineligible? 
    ERC can be taken in the first quarter of 2021 on payroll costs that will not be included in PPP forgiveness.  Therefore, for payroll costs incurred before the PPP Round 2 is disbursed can be included in the ERC.
     
  10. As a 501c3, our earned revenue went to zero on Mar 15, we have been surviving on private donations, is reduction in revenue based on earned revenue or must it include private donations? 
    The reduction is based on gross receipts and according to the guidance so far, gross receipts would include the following:
  • Non-cash (tangible property) contributions
  • Gross amounts received from the sale of assets or investments, without reduction for cost or other basis and expenses of the sale
  • Gross rental income or sale of inventory (without reduction of cost or expenses)
  • Other (non-PPP) CARES Act funding
  • Multi-year grants or pledges (for organizations filing on an accrual basis)
  1. I have not applied for forgiveness yet on Round One and I am waiting for the new forgiveness form.  Please clarify once again whether the EIDL advance amount is now forgivable or not.  
    If you accept an EIDL, the loan itself will not be forgiven. The only part that is forgiven is the loan advance of up to $10,000. You also need to know that the forgivable loan advance is not a flat $10,000 but $1,000 per employee with a maximum of $10,000 (10 or more employees).

    Your EIDL advance will not have to be repaid if you use 100% of the money for:
  • Paid leave
  • Maintaining payroll
  • Increased costs of materials
  • Mortgage, lease, or rent payments
  • Other obligations that can't be met due to revenue loss
  1. Our bank devalued the PPP second round money to ONE month of payroll (FRB). Please confirm we can ask AGAIN for 2.5 times of payroll (just like 2020 PPP)  
    Yes – you can ask for 2.5 times average monthly payroll costs, however, accommodation & Food Service Industries (NAICS 72) can ask for 3.5 times average monthly payroll costs.
     
  2. Are first time borrowers given priority over those who received RD1 loans? 
    No priority is given for first PPP loan borrowers over those applying for a second round. However, priority is being given to minority-owned and underserved businesses.
  1. Are there any rules around forgiveness for businesses that took round 1, but, due to unemployment being so good and the government not allowing us to open, our FTE count was reduced? 
    Yes, in determining your payroll costs for forgiveness FTE reduction should not be impacted if you tried to hire the employees back.

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