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During the first round of PPP, loan amounts for Schedule F farmers were determined by their 2019 net income. ... but a change in how calculations are made for farmers could result in more substantial payments. The $1,923/week in 2019 test simply determines if that employee is subject to the wage reduction test. Q: What documentation will I need to show to get a second-draw loan? The individuals do not have to be the same people. Q: What if as a sole proprietor, I collect unemployment during all or part of the time? Since you potentially have a forgivable loan from the government to get work done on the farm, why not bring that employee back sooner so you can get the work done sooner? ): Your 2019 Schedule F or Schedule C, For Partnerships (and multi-member LLC’s taxed as partnerships): Schedule K-1 from the 2019 Form 1065 tax return for the partnership. Schedule F in lieu of Schedule C. The calculation for self-employed farmers and ranchers without employees is the same as for Schedule C filers that have no employees, except that Schedule F line 9 (gross income) should be used to determine the loan amount rather than Schedule C line 31 (net profit). Q: Is the forgiveness amount decreased by the Sec. Specifically, for self-employed farmers and ranchers who file IRS Form 1040 Schedule F, calculate your gross income using line 9. Q: Can you apply for recalculation if you did not take full amount in first round? No, an EIDL loan is not forgivable for any business. Other farmers who had a net Schedule F profit or less than $100,000 will also benefit from this new rule, because they'll be able to make that eligible amount up to $100,000. Yes. No, you cannot prepay employees (and expect them to work for less or for free later on). Once you've received your increase, then you may then consider a Second Draw PPP loan. The amount eligible for forgiveness is 8/52 of the amount on box 14A if using an 8-week covered period or 2.5/12 if using a 24-week covered period. How do we calculate that utility expense? The key is some kind of third-party verification of the expense and payment. First, make note of your application date and the guidance that was available at the time. How do I prorate this? In the meantime, a single member LLC owner’s forgiveness would be calculated as 8/52 (2.5 /12 for the 24-week covered period) of 2019 net profit from the schedule F or C that was filed with their PPP loan application. No, PPP loans are not considered income. Any wages reported on an employee’s W-2 counts as eligible payroll expenses. The SBA allows for an alternative method for calculating FTE’s that does not require you to document hours paid. So, before applying for your 2nd Draw PPP loan, even if you (Agricultural employers may or may not be subject to unemployment.) In many cases, the amount you could qualify for in a Second Draw loan could be the exact same amount as you qualified for in the First Draw loan plus any increases. Q: We use ACH (or online payments) for many of our expenses. We recommend that you review these policies on the linked site. This specific scenario is not explicitly addressed in the existing guidance. Use the PPP eligibility tool to determine if you are eligible for additional PPP funds. So, for a farm that made $100,000 or more in 2019 and had no employee costs, the maximum loan they’d be eligible for is $20,833. Q: Can I still apply for CFAP (Coronavirus Food Assistance Program)? 2b) you were in operation for 12, consecutive weeks between 2/15/19 and 2/15/20. For S corporations (IRS Form 1120-S): sum of lines 2 and 6, minus line 4. AgChoice will  keep its PPP borrowers up-to-date on any program changes and considerations for forgiveness. View the offers. considered utilities? The responses to the following Frequently Asked Questions are based on Farm Credit East's reading and interpretation of the Paycheck Protection Program rules and policies. Realize, however, that if you pay the employee more than the equivalent of what would be a $100,000 / year salary / wages during any given pay period ($1,923 / week, $3,846 / two weeks, etc. 2021 PPP •Unique calculation for Individuals that file Schedule F ⁃Can use 2019 or 2020 gross income ⁃Prior rules required use of net income •Tax rules clarified – PPP proceeds . In this case, the business as a whole did not experience a 25% or greater revenue reduction and therefore would not be eligible for a second-draw loan. Existing PPP loan caps still apply. You are already counting them in wages/salaries (aka gross pay). Mechanicsburg, PA 17050 Internal records are not acceptable documentation for forgiveness. Do we have to spend 60% of this on payroll? Rent paid to a related party (including business entities with common ownership) may be counted for PPP loan forgiveness, within certain guidelines. is considered payroll costs for purposes of the PPP loan program (both eligibility and forgiveness). What about services incurred during the period but paid for after the Covered Period? The EIDL loan is a loan and you’ll repay it according to the schedule set forth in your promissory note. The maximum amount of forgiveness for employee cash compensation for the 24-week covered period is $46,154. If you do not have third party payroll service provider reports to use for documentation for any or all of payroll expenses, your documentation requirements will include: Q: If you don't use a payroll processor and just use Quickbooks and cut manual checks, what type of documentation can you produce to validate your employee payroll? AND If the 2020 return has not been filed, borrowers are instructed to fill it out and compute the value. You can still pay more than that, but the forgiveness for that employee (or owner), will be capped at $15,385. Farmers will use line 9 of their Schedule F to determine the amount of owner compensation used in their calculations, but it’s capped at $100,000. January 1, 2020 - March 31, 2020 If when you file your 2020 Schedule F, it does not show at least a 25% reduction from your filed 2019 Schedule F, you will have to repay your 2nd Draw PPP loan in full. However, loan funds are still restricted to be used on eligible payroll, utilities, interest or rent expenses. For a 24-week covered period, owner compensation replacement is limited to 2.5 / 12. Or, from one quarter in 2020 when compared to the same quarter in 2019, you may use your internal accounting records. Any amount not forgiven becomes a loan at 1% interest, payable over 2 years from the date of origination. The funds were used as allowed and the loan was forgiven. Q: What is a seasonal business according to the SBA definition? Total compensation to any employee is capped at $15,385 for an 8-week covered period. Do 1099's for fishermen count towards payroll? Q: Can I return unspent PPP funds without penalty? Like a First Draw PPP loan, you will also need to certify that the current economic uncertainty makes the loan request necessary to support your ongoing operations of you. The EIDL and PPP programs both grant loans to business owners. Q: Does the interest on all loans qualify as an eligible use of PPP funds? Most banks will provide canceled checks or images on request if they don’t do so automatically in statements. Many banks did not include partnership income in the early rounds of applications because SBA had not addressed that they were acceptable. Your loan application only considered your payroll expenses and the amount you could receive under the PPP was equal to 2.5 times your average monthly payroll costs. For S-Corporations (IRS Form 1120-S): sum of lines 2 and 6, minus line 4. Q: When is the application deadline for new PPP loans? We’ve seen the PPP program rules change before. considered a “utility”? Cash vs accrual? In most states, employers pay unemployment to the state. Farm Credit East is only accepting the following PPP applications: Q: Will Farm Credit East be working with us as we work with Kabbage? 1b) You receive 75% or more of your income in six months of the year, One of these two questions Probably not. Q: Our FTE employees work 32 to 36 hours per week. This depends entirely on how much you DO spend on payroll. Here’s the scenario: A farmer applied for a PPP loan in 2020 because he had employees but knew he, himself, did not qualify because he was required to take Line 34 from Schedule F (net profit) and it was negative. Do the employees have to be the same individuals? If the single-member has elected to be taxed as a c-corporation or an s-corporation, the single-member LLC does not count as a sole proprietor and cannot calculate PPP loan eligibility based on gross farm income. However, documentation is a separate question than what amounts qualify for loan forgiveness. You need to apply for forgiveness with your PPP lender. Can I include the full amount of the paychecks I issued at the beginning of my covered period? Note: if your lender is Kabbage, you will complete your forgiveness application with them. Step 1: Calculate payroll costs by adding the following: For self–employed (farmers and ranchers): 2019 or 2020 Form 1040 Schedule F line 9 gross income, up to $100,000 annualized (not eligible for a loan if this amount is zero or less). If you had cut their wages, simply use your PPP funds to restore them to their original pay rate in order to avoid forgiveness reduction due to pay cuts. Keep in mind that all PPP loans at every lender are accruing interest from the day the funds are disbursed until the day the loans are paid off or forgiven. Q: What about payment for unused vacation time? The 2019 payroll year has been completed. Then once you've considered the Second Draw loan and determined whether or not you're eligible, think about when you want to apply for forgiveness and have a strategy in mind. Send your correctly completed loan application to Ethan.Robertson@farmcrediteast.com. This limitation does not apply if an eligible recipient, in good faith, is able to document an inability to rehire individuals who were employees on February 15, 2020, and an inability to hire similarly qualified employees for unfilled positions on or before December 31, 2020, OR, is able to document an inability to return to the same level of business activity as prior to February 15, 2020, due to compliance with COVID-19 restrictions. Q: If using the APCP, is the 56-day (168 day for 24-week covered period) window “reset” to match the APCP 56-day window for payroll? If you had a Schedule F loss in 2019, you previously weren't eligible for a PPP loan. No, as long as their other job is with a different employer. Each PPP borrower has 24 weeks plus 10 months to apply for forgiveness. Q: If I have more than one application, do I have to use the same covered period for all? You would annualize that 12 weeks' worth of payroll, and then use that to determine your PPP loan. Farm Credit East will require revenue reduction documentation at the time of second-draw loan applications. All U.S. resident employees count the same way. Note that loans closed after June 5, the loans will be repayable over 5 years. You will need to allocate and document the portion of the pay run that was incurred within the covered period. Note: Farm Credit East will take second-draw application from first-draw borrowers only. The pay period including June 30, 2020. The same is true for Kabbage as of this writing. The work on a farm is never done! The instructions for completing form 3508 state that Table 1 should include all employees whose principal residence is the United States who worked at any point during the COVERED PERIOD, whose compensation was less than $100,000 annualized at any point in 2019. Q: What about leases – we have an equipment lease and the equipment is collateral on it. Q: If an employee did not receive $1,923 per week in the prior year, can they be given a bonus to reach that threshold? For individuals that already received a First Draw PPP loan back in 2020, what options are now available given the new COVID Relief Act? What would be the documentation needed? Q: Is the forgiveness for Owner Distribution for an LLC Partnership still limited to $15,385 over 8 weeks ($46,154 for 24 weeks)? The test is that you maintained FTEs, so you will compare your reference period to your covered period and show the math to support if you maintained (or reduced) the same level of FTEs. Q: Are cell phone bills (pagers, internet access, etc.) Q: Do I have to list all employees from 2019 in Table 1, even if they did not work in 2020 or January 1, 2020 - March 31, 2020? With the new changes and the opportunities to qualify for some of this additional PPP funding, when do you think a borrower should apply for loan forgiveness? The more PPP (Paycheck Protection Program) funds you spend on payroll, the better. The employer also had/has the opportunity to restore employment by the end of the covered period to avoid forgiveness reductions. This is consistent with our policy of making only PPP loans that are expected to be fully forgiven. Funds can be paid back at any time without penalty. The PPP loan eligibility and forgiveness are based on the earnings from self-employment of an owner who is a partner or a sole proprietorship. The interest portion of your payments may tax deductible as a business expense. Note that this does not include shareholder distributions / dividends. First, choose whether you’re using your Covered Period (CP) or Alternative Payroll Covered Period (APCP). The amount requested for loan forgiveness may not exceed the amount of mortgage interest owned by the landowner. Q: Most banks don’t provide canceled checks or even show images on their statements. If forgiveness is applied for and granted, and any remaining funds are paid back before the twelve-month mark, there will likely be no out-of-pocket interest expense. If the single-member LLC files its business income on a schedule C, it is not eligible to use gross income. Q: Any modification to the 8/52 if the PPP application was based on "seasonal earnings" from 2019 with a greater percentage of earning occurring in the spring? your filed 2020 Schedule F when you apply for forgiveness. Funds can be paid back at any time without penalty. If you instituted “Hazard Pay” prior to the start of the Covered Period (or APCP) and maintain that additional rate of pay throughout your Covered Period (or APCP), it will not result in a reduction of forgiveness, assuming that the pay rate for each employee including hazard pay is above the average rate of pay for each employee January 1 – March 31. Q: If you are a husband and wife sole proprietor, do you only qualify for one person? There's a new, simplified loan forgiveness process for loans $150,000 or less which includes a one-page form. Any bills paid during the Covered Period will count as long as it is not a ‘prepayment’ of the expense. 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Important for our listeners to know about the recent COVID-relief legislation which passed on December 27 2020. New PPP loans the calculation retroactively to be the same PPP lender for first Draw increases as of.

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