Senate Extends PPP Deadline!
Update: President Biden has signed the PPP extension into law today (March 30th)!
Last week the US Senate voted to extend the deadline for applying for the Paycheck Protection Program (PPP) from March 31st to May 31st. The House had previously passed the same bill and President Biden is expected to sign it shortly.
This extra two months gives family child care providers additional time to apply for this important program. It also gives providers who previously received money from the PPP a greater opportunity to apply for the Second Draw PPP.
The PPP is a forgivable loan program, offered through the Small Business Administration (SBA), that offers financial relief to providers who have suffered because of COVID. It is tax-free money that does not have to be paid back if you spend it on allowable expenses. The amount you will receive is based on your gross income (Schedule C, line 7 if you are self-employed). For example, if your gross income was $60,000, you would receive $12,500! You do not need to have employees to apply.
Don't miss this final opportunity to get this money!
How do I apply for the PPP?
Apply for this program through your local bank or online lender. Here’s a link to some online lenders. Some lenders will ask for your "average monthly payroll" which can be confusing. Your average monthly payroll is your gross income divided by 12 months. Some banks may require you to have a separate business bank account. If this happens, apply through an online lender. You are not required to have a separate business bank account. You must be in business by February 15, 2020 to be eligible for the PPP.
Note: Each lender will have their own online application form for you to fill out which will look slightly different than the SBA form I describe in my articles. But, the questions should be very similar.
What can you spend the PPP money on?
You can spend the money on payroll (for employees or on yourself), mortgage loan interest, rent, utilities, food, COVID supplies and transportation.
You must spend at least 60% of the money on payroll.
You can spend up to 100% on payroll for yourself. To do this, simply write yourself a check and enter "payroll" in the memo line. You can then deposit the check right back into your account. Or, transfer money from one bank account to another. Once you pay yourself, you can spend the money on anything you want.
You do not owe any payroll taxes when you pay yourself and the money is not taxable income when you pay yourself.
You must spend all of the money within 24 weeks of receiving it.
Can I write a check to myself in one lump sum?
There is no rule about how to pay yourself. You could write yourself one check or several checks spread out over a number of weeks. I would recommend writing more than one check. Some providers worry that the amount they pay themselves is more than they normally earn caring for children. Don't be concerned about this. It doesn't matter.
When can I apply for forgiveness?
Providers sometimes are fearful of applying for the PPP because they worry that they won't have this loan forgiven. They don't want to get a loan they will have to pay back. Don't worry about this! There is a very simple forgiveness form that does not require you to produce any documents on how you spent the money. (Although I do recommend you keep your own records showing where the money went.) You can apply for forgiveness within weeks after receiving the money. Ask your lender to process your forgiveness.
How does this new deadline affect my ability to get the Second Draw PPP?
If you haven't previously received any PPP money, you are eligible for the First Draw PPP, not the Second Draw PPP. If you have received PPP money in either 2020 or 2021, you may be eligible to receive additional money from the Second Draw PPP. Previously I have written that you have to wait eight weeks after receiving the First Draw PPP before you could apply for the Second Draw PPP. In fact, you can apply within a few weeks, so contact your lender about applying earlier than eight weeks.
Update: Please note, however, that even though you can apply for the Second Draw before 8 weeks, you must spend the First Draw money before you can receive the Second Draw money. Some lenders are quickly processing Second Draw applications and the money is arriving before 8 weeks have passed. This should not happen. If this happens, contact your lender and ask them what you can do.
To be eligible for the Second Draw PPP, you must show at least a 25% decline in your gross income from 2019 to 2020. You can show this decline in any quarter of 2020 as compared to the same quarter in 2019. You do not have to show any decline in income when applying for the First Draw PPP.
Unemployment and state grants
If you apply for PPP money and are receiving, or planning to receive, unemployment benefits, this may affect these benefits. Each state has different rules, so talk with your state unemployment office about this. Receiving PPP money may disqualify you from receiving unemployment benefits for a period of time. Receiving state grants (CARES grants, stipends, and other grants) does not affect your ability to qualify for the First Draw PPP. Such grants are taxable income, so they could affect your ability to qualify for the Second Draw PPP.
Apply now!
This extended deadline gives you time to file your 2020 taxes and use the gross income from your 2020 taxes when applying for the PPP. You may apply for the PPP using your highest gross income from 2019 or 2020.
Tom Copeland - www.tomcopelandblog.com
Image credit: Small Business Administration
