PPP Draw1...Surge coming?

Technical topics regarding tax preparation.
#1
Posts:
679
Joined:
30-May-2014 1:43pm
Location:
MA
When I heard PPP2 was coming I thought we would have a handful of clients qualify based on the 25% revenue decline rules.

But then I started thinking, technically wouldn't every single Schedule C client that did not file a PPP application last year because they were either a) collecting unemployment or b) did not think it applied to them because there was no economic impact, now be eligible for PPP Draw 1

$20,000 of net Schedule C is going to get you over $4k in PPP. If the govt is handing out free money, there will be no shortage of takers
 

#2
Posts:
679
Joined:
30-May-2014 1:43pm
Location:
MA
Just going through the list we had dozens of schedules c that we did not have apply. And I am only a quarter through the alphabet.

For example, consultant made over $150k during 2019. Received 2 1099's and had minimal expenses. He is eligible for $20,833 ???
 

#3
Posts:
724
Joined:
22-Sep-2014 9:25am
Location:
Farmington, Michigan
wouldn't every single Schedule C client that did not file a PPP application last year because they were either a) collecting unemployment or b) did not think it applied to them because there was no economic impact, now be eligible for PPP Draw 1


Yes.

Draw 2 requires drop in revenue. Draw 1 does not.
Dave

Taxation is the price we pay for failing to build a civilized society. ~ Mark Skousen
 

#4
Posts:
679
Joined:
30-May-2014 1:43pm
Location:
MA
This is going to be interesting to see how this plays out. Just about everyone of our S Corp and C Corp applied. But because the rules kept changing on PPP early on and there was a huge focus on satisfying the payroll requirements over 8 weeks, I think Sch C’s were an afterthought unless they had employees.

The stigma is gone about do you need the funds and you figure most of the big entities have got theirs so there will be less scrutiny. Will be a busy week next week
 

#5
Posts:
2771
Joined:
22-Apr-2014 1:34pm
Location:
North Carolina
The thing that really bothers me are the number of entities that are applying for the PPP loans that really have no need for it. I have quite a few clients that have had blockbuster years, but are applying for the second round of PPP loans. And yes, they do qualify for various reasons. For example, one was shut down for two months to move to a better, large location, so revenue did decrease over 25% in one quarter, but for the year is up significantly. One's second PPP loan amount has increased substantially due to them adding employees because of the increase in business.

I just don't get it. Yes, they may qualify, but do they need it? Have they been negatively impacted? We all know nothing is free. I see tax rates going sky high in the coming years from all of this!
 

#6
Posts:
679
Joined:
30-May-2014 1:43pm
Location:
MA
I can not disagree with what you are saying Seaside because in looking at the local companies that applied in our neck of the woods, I am estimating that 90% to 95% did not need the funds. And I think the same % applies to our client base. You can at least look back and argue that at the time (think April 1) most people had no idea how bad this was going to be.

The conundrum we find ourselves in as advisors is should we be deciding who needs the money and who does not. Is it safe to assume that the worst is over? I think all we can do is identify clients that are eligible and give them the choice.
 

#7
Posts:
2771
Joined:
22-Apr-2014 1:34pm
Location:
North Carolina
Agree Berkshire. I am doing just that - identifying if they qualify or not - and then they can decide what to do. This has shown me a whole different side of people. It seems the ones that need it the least are the first in line! And then they are the very ones that are the first to complain about how high taxes are!
 

#8
eze  
Posts:
311
Joined:
8-May-2014 7:02pm
Location:
Grey Area, California
Seaside CPA wrote:Agree Berkshire. I am doing just that - identifying if they qualify or not - and then they can decide what to do. This has shown me a whole different side of people. It seems the ones that need it the least are the first in line! And then they are the very ones that are the first to complain about how high taxes are!


So true.
 

#9
Posts:
1246
Joined:
22-Apr-2014 5:22pm
Location:
Upstate, NY
SlipperyPencil wrote:
wouldn't every single Schedule C client that did not file a PPP application last year because they were either a) collecting unemployment or b) did not think it applied to them because there was no economic impact, now be eligible for PPP Draw 1


Yes.

Draw 2 requires drop in revenue. Draw 1 does not.


Draw 1 required “certifying economic uncertainty”.......draw 2 does too I believe. So those companies that are up may have a hard time making that certification s time. Most of my clients that don’t need it are not applying. With all the fraud in the first one, they are nervous the second one will get more scrutiny......

As you all mentioned, its up to them.
 

#10
Posts:
679
Joined:
30-May-2014 1:43pm
Location:
MA
I'd be interested in hearing from others what % of your business clients took PPP last year. I am guessing that if you had a large % apply last year then I would think you would also have a large % of Schedule C filing for PPP Draw 1 now. Like I said it was mainly our corporate clients with Payroll that went after it last April. Now the emphasis is off of Payroll more Schedule C

But if you had very few apply last year, it makes sense that you would have even less this year.
 

#11
sjrcpa  
Posts:
6471
Joined:
23-Apr-2014 5:27pm
Location:
Maryland
Close to 100% of my clients got PPP loans.
 

#12
novacpa  
Posts:
1228
Joined:
28-Apr-2014 1:16pm
Location:
McLean, Virginia 22101
I did my 1st application, got to "Lender Match" (something new). Sent it off. Got an email this morning
from the SBA stating, "none of our qualified lenders responded to your loan request, Sorry, re-apply later".
Dead end.
Unlike PPP #1, now the SBA has elected to qualify lenders, a very limited number of lenders. And
only those lenders are eligible to make the loan. If they don't respond - too bad, you and your client
is out of luck.
 

#13
Posts:
679
Joined:
30-May-2014 1:43pm
Location:
MA
Most of the local banks and even Bank or America, have been saying that they will not accept applications until this Tuesday January 19.

I think this past week has only been opened to...

When the PPP loan portal re-opened today, it initially accepted First Draw PPP loan applications from participating CFIs, which include Community Development Financial Institutions (CDFIs), Minority Depository Institutions (MDIs), Certified Development Companies (CDCs) and Microloan Intermediaries
 

#14
novacpa  
Posts:
1228
Joined:
28-Apr-2014 1:16pm
Location:
McLean, Virginia 22101
The 1st PPP loan program, a great many loans were eagerly provided by online lenders such as
Cabbage, PayPal, etc.
They wanted the 5% origination fee.
I see no such fee in PPP #2.
This greatly reduces the interested lenders. All of these
CFIs are useless, for small amounts, they don't want to service the loan for
the tiny amount they could make.
 

#15
IDCPA  
Posts:
1104
Joined:
22-Aug-2014 11:22am
Location:
Idaho
It's my understanding, just from speaking to local lenders and reading a little guidance this has been implemented in waves. Lenders with over $1B in assets will open up on Tuesday. My list is much longer than I had anticipated. Good thing we have so much extra time to report 1099s to the IRS....

Also I have multiple clients who really have had a rough year and could use the boost. Others looking to take advantage... The 25% clause will keep most away, but some with sporadic large revenue streams will technically qualify.

But I figure I provide them with all the info and if they feel comfortable applying they're my client and I'll assist any legal way I can.

I have been informing them that the SBA is auditing these loans fairly heavily (banker told me that, assume it's true), and I am explicit about what they are certifying when they apply. I'm not here to police my clients in this arena, but I will inform them of the potential issues and let them make those decisions.

At the end of the day, I think everyone knows/knew businesses who didn't 'need' these loans, but I think they're just trying to pump money into the economy. It would have been real easy to say they were forgivable loans for those who show a drop in revenues on the first batch. That would have deterred a lot of people but the goal was to prop up the economy. I sure hope it works, because it's gonna be expensive down the road.
 

#16
Posts:
2771
Joined:
22-Apr-2014 1:34pm
Location:
North Carolina
"Good thing we have so much extra time to report 1099s to the IRS..."

What do you mean here IDCPA?
 

#17
IDCPA  
Posts:
1104
Joined:
22-Aug-2014 11:22am
Location:
Idaho
I mean to be sarcastic :)
 

#18
eze  
Posts:
311
Joined:
8-May-2014 7:02pm
Location:
Grey Area, California
Filed a few small applications today. Cross River Bank is awesome. I've gone almost full cycle with a few clients....Draw 1 was accepted quickly and forgiven quickly...small loans. Just applied for Draw 2 with Cross River for same clients.

Also made some Draw 1 applications for Schedule Cs that had no payroll for the original PPP.

The difference in bank web portals is stunning. Some are great, some are dreadful.
 

#19
eze  
Posts:
311
Joined:
8-May-2014 7:02pm
Location:
Grey Area, California
BerkshireCPA wrote:I'd be interested in hearing from others what % of your business clients took PPP last year. I am guessing that if you had a large % apply last year then I would think you would also have a large % of Schedule C filing for PPP Draw 1 now. Like I said it was mainly our corporate clients with Payroll that went after it last April. Now the emphasis is off of Payroll more Schedule C

But if you had very few apply last year, it makes sense that you would have even less this year.



Round 1 was terrible, lots of clients disappointed by their banks. The banks prioritized the large loans and left everyone hanging. Round 2 BofA came around and got everyone funded. Cross River was very help for the smaller folks that couldn't even get a return phone call from a bank. Almost everyone that wanted funding was funded in Round 2 last year.
 

#20
eze  
Posts:
311
Joined:
8-May-2014 7:02pm
Location:
Grey Area, California
BerkshireCPA wrote:I'd be interested in hearing from others what % of your business clients took PPP last year. I am guessing that if you had a large % apply last year then I would think you would also have a large % of Schedule C filing for PPP Draw 1 now. Like I said it was mainly our corporate clients with Payroll that went after it last April. Now the emphasis is off of Payroll more Schedule C

But if you had very few apply last year, it makes sense that you would have even less this year.



Round 1 was terrible, lots of clients disappointed by their banks. The banks prioritized the large loans and left everyone hanging. Round 2 BofA came around and got everyone funded. Cross River was very help for the smaller folks that couldn't even get a return phone call from a bank. Almost everyone that wanted funding was funded in Round 2 last year.
 


Return to Taxation



Who is online

Users browsing this forum: Anderly, Google Adsense [Bot], JoJoCPA, sok454, Terry Oraha, UnlicensedTaxPro and 141 guests