COVID-19: Paycheck Protection Program Flexibility Act of 2020

This article provides important updates to conditions around the Paycheck Protection Program (PPP) following the passage of the Paycheck Protection Program Flexibility Act of 2020. Updated 6/9/2020.

OVERVIEW

The IRS has recently announced an update to the Paycheck Protection Program (PPP) administered by the Small Business Administration (SBA), which was signed into law on June 5, 2020 as part of the Paycheck Protection Program Flexibility Act of 2020.

The most pertinent updates from the Act are:

  1. You may now utilize PPP money to fund your payroll for an additional sixteen weeks - or a total of twenty-four weeks. This does not mean that you will receive more funds - it just means that you have more time to use the money you've received.

  2. Employer Social Security taxes can now be deferred during the twenty-four week loan period - and you may continue to defer your social security taxes if the loan is forgiven as well. 

Employee Retention Credits still cannot be leveraged by your organization if you're approved for the PPP loan, however, you may utilize them in tandem with tax deferrals if you are not a PPP loan recipient. 

Our process, prior to previous legislation passed on April 5, was to collect deferred employer Social Security taxes from your organization once we were advised of the receipt the PPP loan. We will no longer collect these funds automatically.


STAY UP TO DATE:

Always stay up to date with COVID-19: Consolidated Appropriations Act Updates for 2021.
 

NEW PPP RULE

If your organization is approved for a PPP loan, you may no longer utilize Employee Retention Credits. Loan forgiveness now has no bearing on the eligibility for any other CARES or FFCR act provisions. If your loan application is forgiven, you may continue to leverage Employee Retention Credits.

Note: 50% of all employer Social Security tax deferrals are due on December 31, 2021, and the remaining 50% is due on December 31, 2022. 

  Refer to this document for more information: SBA Loan Timeline
 

ADDITIONAL PROVISIONS

Payroll Costs

  • Part of the criteria used to determine if an employer will receive 100% loan forgiveness is if funds are used to restore employment and wages that were reduced over 25%.

  • The passage of the most recent legislation includes a reduction in the percentage of eligible forgiveness expenses that must be spent on payroll costs from 75% to 60%. 

  • This will allow borrowers to use up to 40% of their eligible forgiveness expenses on mortgage interest, rent, and utility obligations.

Undoing Salary and Wage Reductions:

  • One of the PPP loan’s conditions is that employers must try to restore employee headcount and undo any salary reductions as a result of COVID-19. 

  • Employers now have an additional six months to rehire their terminated employees, or to restore the salaries of anyone receiving salary cuts, in order to avoid reductions in loan forgiveness. 

  • The previous deadline was June 30, 2020, and has been extended to December 31, 2020.
     

FAQS

When can I start deferring my employer Social Security taxes?

You can start deferring your employer Social Security taxes right away, whether you have been approved for or denied a PPP loan.

If my PPP application is denied, can I continue to defer my employer Social Security taxes and utilize employee retention tax credits? If so, for how long?

Yes - if you are denied a PPP loan, organizations can continue to defer employer Social Security taxes and utilize retention tax credits for the remainder of the 2020 calendar year.

I haven’t started deferring my employer Social Security taxes yet. How do I get that process started?

Please fill out and submit our COVID-19 Tax Deferral Waiver to get the process started of deferring your employer Social Security taxes.

Can I utilize employer Social Security tax deferrals and employee retention tax credits along with the new Federal Paid Family Medical Leave and Paid Sick Leave?

Yes - the Paid Family Medical Leave and Paid Sick Leave earning codes can be used at any time, regardless of your PPP loan status.
 

If I am approved for a PPP Loan, can I continue to utilize employee retention tax credits? If so, for how long?

No - employee retention credits can only be used until the date in which a PPP Loan is approved.
 

Where can I find more information about the most recent updates to this legislation?

Please find the most up-to-date information and legislation at the IRS Website.