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PPP Loan for our firm

Technical topics regarding tax preparation.
#1
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Been discussing with other CPAs and accounting establishments about the PPP loans for themselves. I got our loan fairly late in the game once I could see that the revenue was not up to prior year's amounts and not knowing when my cash flow would return to normal.

Interestingly I heard it through the grapevine that other firms that did receive PPP loans were talking about paying back the loans? I understand some practitioners did not apply since they thought their revenue was more of a timing issue and that their income would bounce back by the year end whereas other practitioners like me wanted to have the funds before it ran out. I'd be interested to hear how other practitioners feel about taking the PPP for themselves on this forum and in other states. I helped a few clients that net way more than me apply for the PPP that needed it now but were confident that they could get back to normal since it was a timing of when the economy gets back and running. I know that can be said of the service industry but they won't bounce back as fast. Maybe it is an ethical issue or am I just holding myself to an unrealistic standard? I did apply once my webinar instructor told us that he applied; so, I'm using that as another justification right or wrong.
 

#2
seth88  
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It will depend on the firm but for most firms it comes down to an ethical decision. The first round of PPP I tossed and turned over whether to apply for it for my firm. As u stated I was seeing extremely wealthy clients applying for them. My amount was small compared to my clients, but I ultimately decided not to apply. I felt guilty as others were suffering more than me. My business was definitely affected and my business has dipped but I’m fine and I’m confident I will be OK. Also a thing to consider is that it is likely that it will be open to the public who all the recipients were. Will you feel comfortable if other people in your community 2 years from now google it and know you got a PPP loan even though they know you are a successful CPA and make good money?
 

#3
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seth88 wrote:Also a thing to consider is that it is likely that it will be open to the public who all the recipients were. Will you feel comfortable if other people in your community 2 years from now google it and know you got a PPP loan


Something tells me that the "people" who will search for this information and pass judgement without examining context are not one's clients, would not make good clients, and wouldn't be pleasant to spend much time around.
 

#4
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Since I've been in practice less than 5 years, I"m hardly what you would classify as "successful"...yet until this happened. Building slowly and responsibly has helped me keep the overhead low and manageable.

At any rate, I do agree with ManVsTax that I wouldn't want clients that pass judgement based on a list although I do acknowledge I do worry about that for existing clients' perception and that is the reason for the post.

I did encourage most if not all of my eligible clients to apply. I did get a lot of feedback from them as to why I was hesitant on applying too. Some even jokingly asked if CPAs were "better than us" when I told them that we are held to a higher standard.

It is troubling that the list of PPP loan recipients could potentially be made public. Not only for CPAs but any an all businesses. That would seriously be invasion of privacy but I can see the argument on the other side.

Another CPA I spoke to helped me get over the hump by pointing out that he will be answering a lot of questions about the PPP and helping a lot of businesses fill out the paper work in order to get the loans forgiven. Plus he said it would be very difficult to charge the clients for the extra time and effort for all of this; so, his loan would make up of lost or deferred revenue and be his "payment" for work done without pay. Once I heard that, I did feel better enough to apply. Anyways, I did want feedback as to what other CPAs and tax practitioners were doing. And to be honest, hopefully make me feel better about taking the loan. I know others would not want to volunteer that they took funds for fear of being judged by other members so I understand.
 

#5
seth88  
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I hear you but to me personally it was not the existing clients or potential clients that was concerning but just people in your community. Successful CPA’s usually are fairly well known in the community. I don’t blame anyone for applying as it was a poorly written law that was vague as to who can apply. Deep down I just did not feel good about it. I advised one of my clients to think about the optics of it if it became public and he blew my concerns off. Their has already been one prominent resignation when PPP info got leaked to the press because it did not look good. You can google it and see. I know of one story and there maybe more. But don’t sweat it. If u feel bad pay it back. This is one reason I did not do it. I did not want to waist mental energy on whether I did the right thing. I have a close friend who has a firm also and they applied and got and it does not bother him at all.
 

#6
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Did I apply for PPP? YES. Did I lose sleep over applying? NO. Do I think there is an ethical issue? NO. Do I worry about people learning I received PPP? NO

As tax professionals, we are always putting our clients ahead of ourselves. We feel obligated to help them even when they don't want to help themselves. We spend hundreds of unpaid hours a year reading tax articles, tax pronouncements, tax bills, and new tax law to determine how these may or may not impact our clients for fear of not informing them of opportunities.

We worry about helping our clients, but we should worry about ourselves just as much (or more).

Congress is supported by hundreds (or thousands) of top tax experts, lawyers, policy wonks, and others when drafting legislation -- how else could it have created the 854 page Cares Act "overnight"? They purposefully wrote a broad open-ended law which allowed (legalized) what some are calling "abuse". Unfortunately, this was the intent of Congress.

Did my receipt of PPP funds prevent someone "more needing" from getting funds? Maybe. However, maybe that person should have engaged a CPA or EA. Maybe Congress should have drafted a better bill. Maybe Congress should have allocated more funds.

If you're walking down the street and see an Andrew Jackson laying on the street, do you pick it up and put it in your pocket OR do you ask "Did anyone lose a $20?" And if you're the type that asks, how do you feel when the guy getting into the newest Mercedes says -- "Yes, I lost that $20"?
 

#7
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I applied for both the EIDL & PPP and do not feel bad about it at all. Do I need the money? No, not at all. My receipts are higher than ever this year. I did it for two reasons. 1. So I could go through the process myself. This allowed me to fully understand it and I was able to easily advise clients on it. 2. I feel like I pay an insane amount of federal taxes. I do not get the QBI deduction that most other business get. So if there is a way to recoup something I am doing it and will not even think twice about it. It is a drop in the bucket compared to what the Treasury will get from me. I feel like the decision to not apply for this is like not taking a deduction you are entitled to take.
 

#8
sjrcpa  
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swgordon wrote:Do I need the money? No, not at all.

Yet you certified for PPP that "current economic uncertainty makes this loan request necessary to support the ongoing operations"?
 

#9
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Before rushing to judge anyone, um, the federal reserve is single-handedly keeping the stock market from crashing, so literally everyone qualifies for economic uncertainty they just don’t know it if they think otherwise.
 

#10
sjrcpa  
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I wasn't judging swgordon-just asking a question.
Terry I agree with you about economic uncertainty.
 

#11
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The problem is that there was, and still is to some extent, a great deal of uncertainty regarding coronavirus, recovery timelines, and the economy.

Back in March/April, we did know what the world would look like 6 months later. A good many firms were deferring revenue for some clients without 100% certainty that we'd be able to collect on that revenue later. Some of my clients are involved with short-term rentals in vacation areas and small restaurants/cafes. They have been absolutely decimated because of coronavirus. If they can't pay the fees I deferred for them (a very generous percentage), I absolutely will suffer.

As previously noted, many firms also digested, disseminated, and consulted on a flurry of tax legislation that was rapidly pushed through. I originally planned on billing, but haven't billed a single client a dollar yet for consulting on the PPLs and EIDLs. I don't know that I will either.

I can't help but think that anyone who would pull names from a list years from now, look at the recipient's financial status long after coronavirus and uncertainty has passed, and pass judgement doesn't understand context, business, and isn't the type of human being I'd get along with anyway.
 

#12
Kris S  
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FullContactPrep, I notice you are in Hawaii which points out that location and type of practice may affect the decision to take PPP. And the same on whether to take unemployment or some other government program that comes along.

For those of us who live in tourist areas, there is no way to know how much or when the local economy will return because we need tourists to return. I assume that many businesses in tourist areas will not survive and that will have a large ripple effect in small area. And not only tourist areas. Every area is going to have difficulties in the months to come because businesses are going to fail.

Many business models are being reshaped by this pandemic and ours will be no different.
 

#13
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Of course. How can I not have economic uncertainty. Just because things were good for me during tax season, I still have no idea what the summer months will bring. I have numerous yearly accounting clients that are completely closed for now and that work is gone and might never come back. I guarantee I will be negatively impacted if this continues. The longer it goes the more businesses will shut down permanently.
 

#14
JAD  
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I don't think it's difficult to justify concern about uncertainty, etc. I don't think it is unethical to take the loan. That said, I chose to not take it:

(a) FOIA, and I don't want my info to be public,
(b) I don't trust the govt to not change the rules regarding what is/was ok and what is subject to public disclosure,
(c) others are suffering much more than I and there are limited funds (thought process during the first round),
(d) amount at issue - max $21k, before tax impact. Loan forgiveness is tax free, but I did not believe expenses would remain deductible. I know the House bill specifies expenses are deductible - we will see what happens. For CA, loan forgiveness is not tax free. If after-tax amount had been material and environment settled, then I might have come to a different conclusion.
 

#15
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JAD wrote:
(a) FOIA, and I don't want my info to be public, .


What information would be made public? Would it be all the information provided in the loan application?
 

#16
JAD  
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I do not know. I did not investigate. I simply noticed a disclosure as I scanned one of the docs that FOIA was an issue. Later I read something in the WSJ that re-enforced that.

But here, Google says this:

https://www.lanepowell.com/Our-Insights ... n-Everyone
 

#17
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sjrcpa wrote:I wasn't judging swgordon-just asking a question.
Terry I agree with you about economic uncertainty.


Hi Sjrcpa, I apologize. I did not mean to accuse anyone on this thread of being judgemental. What I was trying to say was that with the Federal Reserve propping up this stock market we are, in some form or another, getting stimulus money from the government. Whether you have taken the PPP money or whether your 401k is overavlued by 35%, or whether by some form of trickle down, all of us are the benefactors of the damage control.

One thing i want to say is that if you are doing soul searching to determine the right answer then that is not an ethical question. That's a moral question. Ethical questions are resolved by ethical standards. In addition, I don't believe aicpa ethical standards bar any cpa from taking the PPP money. With respect to moral questions that's a different matter, and what's right for one person may not be right for others. Nobody really knows the circumstances of others. I agree with others who said that they would not want to associate with anyone who gives too much regard to a PPP list, if ever there is to be one.
 

#18
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We applied for the PPP and received it. I felt a little guilty and my partner felt even more guilty but when just about 98% of clients applied for it, the guilt went away. I am not worried about the economic uncertainty clause as our cash receipts are down 20% from March 15 to May 15, 2020 compared to the same period in 2019. I expect and hope it is just a timing issue but I can not be certain. It will be harder to bill clients who have lost their jobs and closed their business.

The SBA already publishes the loan information for disaster loans, etc. I am sure every PPP recipient's name will be listed along with the address, amount, Bank, etc. Probably even the amount forgiven and/or paid back.

I look forward to scanning the list and seeing what local businesses took it. As a small CPA firm, I do not figure to catch much grief but when you see firms with 200 CPA's applying for it getting a $5 million loan they might take some heat. Same with big law firms. If I had a wealthy politician with a business (i.e. law firm) I probably would have advised it was not worth the grief but I have told all others do not sweat it.
 

#19
seth88  
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I know one person who is worth tens of millions and his business dipped but did not close and It is still profitable and he has the resources to see this through. He openly claimed he was not going to lay anyone off whether he got PPP loan or not. He is using same argument many CPAs are using that “well if this gets real bad maybe our customers down the road quit paying our bills you never know”. He is also a huge Republican that would make fun of Bernie Sanders pre pandemic about how he is a socialist and how his whole campaign is free stuff for everyone. People are finding out he took a pretty big PPP loan and there are some chuckles and eye rolls behind his back. Did he break the law? In my opinion no but does it look good? Is it a a little embarrassing for him?
 

#20
novacpa  
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sjrcpa wrote:
swgordon wrote:Do I need the money? No, not at all.

Yet you certified for PPP that "current economic uncertainty makes this loan request necessary to support the ongoing operations"?


I agree - S Gordon swore under oath - the pandemic injured his business - thus he was entitled to a loan to survive.
Now, admitting publicly, it was not so - is -(in my view) - very damaging to you. Making statements that the real reason you got the Gov't money was to "learn" and to "get back taxes" makes a easy win for a prosecutor.
 

#21
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seth88 wrote:People are finding out he took a pretty big PPP loan and there are some chuckles and eye rolls behind his back. Did he break the law? In my opinion no but does it look good? Is it a a little embarrassing for him?


I think the risk is there for those who took large PPP loans, or those who are truly prominent in the community. For small PPP loans, few people will hear about them and even fewer will even care. There are rumors about a large private employer in my area who received a near-maximum PPP and they may have a PR problem. I don't think almost anyone who gets a $25k loan has much to worry about.
 

#22
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novacpa wrote:
sjrcpa wrote:
swgordon wrote:Do I need the money? No, not at all.

Yet you certified for PPP that "current economic uncertainty makes this loan request necessary to support the ongoing operations"?


I agree - S Gordon swore under oath - the pandemic injured his business - thus he was entitled to a loan to survive.
Now, admitting publicly, it was not so - is -(in my view) - very damaging to you. Making statements that the real reason you got the Gov't money was to "learn" and to "get back taxes" makes a easy win for a prosecutor.


"swore under oath" ... they make you put your hand on a Bible for these things? Does it need to be a "wet" Bible or can you pull up the Bible app on your phone?
 

#23
IDCPA  
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Last edited by IDCPA on 19-May-2020 1:26pm, edited 1 time in total.
 

#24
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novacpa, seriously? LOL. What a joke.
 

#25
ELKCPA  
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swgordon wrote:novacpa, seriously? LOL. What a joke.



Ha ha, yeah that was a little high handed.
 

#26
JAD  
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His post wasn't rude. I'm not sure the same could be said for you two. This isn't FB. He is entitled to his opinion and to post it here. I had a similar thought - he posted, I didn't. But I'll bet that we are not the only two who had that thought. There is no need to call him high handed or his comment a joke. Neither applies.
 

#27
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Sorry but that is how I took it. Everyone has their own opinion I guess.
 

#28
novacpa  
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swgordon wrote:novacpa, seriously? LOL. What a joke.


What to Do if the SBA Finds You Did Not Meet the Necessity Element
Press reports have stated that organizations that cannot demonstrate they needed their PPP loan will not receive loan forgiveness. This would mean that they would simply have a 1% loan for two years.

Alternatively, the SBA could, in theory, conceivably demand immediate repayment if it determined a borrower was not eligible to receive a PPP loan in the first place. Finally, the first interim rule reminded loan applicants that “knowingly” making a false statement to obtain a PPP loan could result in criminal sanctions, including fines and imprisonment. Given the lack of authoritative guidance in this area, it is hard to imagine how anyone attempting to be compliant could meet the “knowing” standard for criminal sanctions to be realistically imposed.

You should consult your legal counsel regarding your risk that such sanctions could apply to your organization or its officers, or both.

The Burden of Compliance Is On the Borrower, Not the Lender
The PPP loan program is characterized by shifting the burden of compliance from the lender to the borrower. FAQ 31 specifically states that “[l]enders may rely on a borrower’s certification regarding the necessity of the loan request.” Thus, lender approval of the loan is not useful for the purpose of satisfying the good faith certification.
 

#29
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I've been quite busy this past week answering questions regarding applications for PPP and now recently the applications for the forgiveness of the PPP loans. I don't anticipate me billing clients for all the extra time spent while the banks got their 5% fees and telling my clients consult with their accountant. I do use this as another reason to help me justify taking the loan.

When helping a client obtain a PPP this week, the bank told me he did process loans for CPAs so now I don't feel to worried about having my name on a public list with the LA Lakers.

Yes as Kris mentioned, being in a place where we went from one of the lowest unemployment rate to one of the highest unemployment rate due to our tourist dependent economy, there definitely is uncertainty as the trickle down effect will be felt in the coming months as businesses my not come back at all.

I do recall thinking we had a pretty decent cash cushion but did not take into account that we did not pay our 4th quarter estimate; so, our tax due with the return ate into that cushion. That made the decision a little easier to make.

I appreciate those that shared their experience with getting the PPP or not.
 

#30
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#31
ELKCPA  
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swgordon wrote:Sorry but that is how I took it. Everyone has their own opinion I guess.


When I read it I thought it was a not so subtle attempt to make you fearful. I'm always on the lookout for manipulation and we may not be FB, but I see it here in these forums.
 

#32
novacpa  
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ELKCPA wrote:
swgordon wrote:Sorry but that is how I took it. Everyone has their own opinion I guess.


When I read it I thought it was a not so subtle attempt to make you fearful. I'm always on the lookout for manipulation and we may not be FB, but I see it here in these forums.


April 28, 2020

False Claims Act and Other Potential Liability for Misuse of Paycheck Protection Program Loans

https://www.nelsonmullins.com/idea_exch ... gram-loans
 

#33
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With the $2 million good faith “safe harbor”, I wouldn’t worry about it if you’re under that threshold. The government goal is to keep people off unemployment ; if you have any employees , I don’t see how anyone can fault a borrower (plenty of CPA firms laid off employees right away, shame on them).
 

#34
skassel  
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I don't get it, swgordon. In writing, on a public site, you admitted to committing loan fraud. Novacpa is 100% correct. If you actually received the loan(s), you have a problem.
Steve Kassel, EA
 


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