PPP Forgiveness

Opportunities for Small Employers

The CARES Act focuses on helping small employers with less than 500 employees keep their doors open and retain their staff. Let’s first take a look at the forgivable loan being offered. Known as SBA 7(a) loans, the rules move the processing of these loans from the overburdened SBA to the banks and credit unions you work with.

The loan is equal to 2.5 times your average monthly payroll costs for the 12 months prior to the loan date

      • New practices without 12 months of payroll history will base the calculation on the average payroll costs for January 2020 and February 2020
      • Payroll costs include salaries and wages (up to $100k in annual salary per individual), PTO, group benefits, retirement plan contributions, and payroll taxes

Please note that if you received the $10k SBA disaster grant, that would reduce the amount your practice would get under this program.

The loan you receive can be used to pay qualified payroll cost, rent, utilities, and interest on business debts. Payroll costs include PTO (paid time off), payroll taxes, group health and also the retirement plan benefits.

Here’s the kicker. If you use these funds to pay 8 weeks or payroll plus other qualified costs, the loan should be forgiven. Certain conditions need to be met including retaining your staff and not cutting their pay by more than 25%. Don’t worry if you have already furloughed your staff. The rules allow you to re-hire your staff and still qualify for the loan forgiveness.

Please reach out to your practice banker right away to get the ball rolling.

Another opportunity allows employers to defer paying the matching social security tax for the remainder of 2020, and will pay those taxes over the following two years. Currently, employees have Social Security Taxes withheld from their pay at a rate of 6.2%. The employer then matches those taxes, so the government gets 12.4% in Social Security taxes for each dollar an employee earns.

Under the CARES Act, employers can defer paying the 6.2% match for the remainder of the year and will pay in those taxes in equal installments over 2021 and 2022.

And if your practice revenue for any quarter is less than half of the revenue for the same quarter in 2019, you might be eligible for a credit of 50% of the payroll cost of your retained employees, up to $5k per employee. You would file for this tax credit on your quarterly payroll tax form.

All of these rules require a lot of clarification, and that will be coming out over the next few weeks and months.

2 thoughts on “Opportunities for Small Employers”

  1. Please clarify – “salaries and wages (up to $100k in annual salary per individual”.
    Does that mean that those making >100,000 will be included, but the amount taken into calculation will only be 100,000 OR those with wages >100,000 are not part of the calculation

    1. I’m assuming that the grant will be based on the first $100k paid to each employee. I’m not 100% certain though. I would suggest reaching out to your lender as they are the one who will know the rules for these 7a loans first. Let us know what your banker tells you. Thanks.

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