PPP loan forgiveness — what you need to know

Tracy Fickett has successfully paired her love of accounting with her passion for the motorcoach industry. 

Her mom, Elaine Fickett, and sister, Jody Merritt, operate their third-generation H&L Charter in Southern California.

Tracy Fickett

“I grew up with that bus parked out in front of the front yard that my dad drove to bingo,” said Fickett. “Eventually, I ended up on the inside, handling some financial matters — accounting, loan compliance and things like that — within the company.”

The trained CPA has an MBA and holds three CPA licenses. Her accounting business, BUSBooks, specializes in the bus industry. Fickett has become well-versed in how the Paycheck Protection Program impacts motorcoach operators. She shared her expertise and answered UMA questions during a recent Town Hall session. 

What’s forgivable?

Current forgiveness rules require 60% of funds be spent on payroll costs. That’s down from the original 75% requirement. Eligible non-payroll costs can include business rent or lease payments, mortgage interest payments and utility payments. Payroll costs include gross wages and salaries, sick pay, paid time off, and state and local taxes on payroll. This includes contributions to employee health insurance and retirement plans, but not federal unemployment tax, federal unemployment insurance or matches to Medicare and FICA. 

What’s the maximum amount for pay?

Employees can earn a maximum of $46,154 for the 24-week time period. Owners can max out at only 10 weeks worth of 2019 compensation, which calculates to $20,833 of the $100,000 per-owner compensation limit. With an eight-week payroll limitation, owners are limited to spending $15,385 per week on employees, which equates to $100,000 in eight weeks. 

Should I use the long or short loan forgiveness application form?

The short is preferable. For this industry, generally, if you have cut employees’ rate of pay — that’s their hourly wage or their salary — by more than 25%, then you have to use that long-form, period. You are eligible to use the short form if you’re a self-employed single-member LLC or a regular single-member LLC. Any Schedule C company will automatically be able to use this form. The second exclusion applies to companies that did not reduce employees’ pay, even if they furloughed them. This also includes borrowers unable to operate at the same level of business — due to compliance with the Centers for Disease Control and Prevention, the federal Occupational Safety and Health Administration, or the Human Services items related to customer safety — which covers most of the motorcoach industry. 

When should I apply for forgiveness?

Banks aren’t accepting loan forgiveness applications yet because they are asking the federal Small Business Administration for guidance on how to process the documentation. The SBA will be opening their portal for the banks on August 10.  Banks will have to understand the SBA process and rules before accepting forgiveness applications. Banks have also been asking for blanket forgiveness for loans under $150,000, which will ease their workload since most of the PPP loans are small. The American Institute of Certified Public Accountants (AICPA) is also providing a free loan forgiveness tool on its website for business owners. 

What’s the preferred way to track payments?

Excel spreadsheets are a good option. Keep copies of all the documents that support that the funds were used on eligible expenses. These records can be in paper or electronic format. Employees don’t need to be paid weekly, but their payments need to be tracked. If staff is brought back for three trips in a week, they can be paid as part of a normal payroll schedule. All PPP funds not used on eligible expenses will be treated as a loan and will have to be paid back. Keeping PPP funds in a separate account will assist in tracking the expenses. Pay bills out of that fund or transfer the amounts out when paying. Some banks were requiring a separate account be opened to deposit the PPP funds into.

How should I record EIDL and PPP funds?

An Economic Injury Disaster Loan advance should be recorded as other income. A PPP loan should initially be recorded as a loan. When it is forgiven, the amount should be put in the same place as the advance on the EIDL, in the other income section. PPP funds must be spent within 24 weeks of arriving in a bank account. You can only use the funds when they actually make it to your bank account, which again should be a separate account. 

You can listen to Tracy Fickett’s entire presentation or contact her at tracy@busbooks.co.


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