2020 Year-End Tax Guide

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Restaurant Recovery: An Update on PPP Loan Forgiveness During COVID-19

As the coronavirus swept across the country, collateral damage has been far and wide, with the restaurant industry sustaining one of the heaviest blows. The food and beverage industry as a whole has been shaken to the core, impacting businesses all along the supply chain, including restaurant owners, operators, farmers, food distributors, and restaurant staff. Many F&B businesses applied for, and received, forgivable loans under the federal Paycheck Protection Program (PPP), created under the Coronavirus Aid, Relief & Economic Security (CARES) Act to help sustain businesses through these difficult times. Now, their attention has turned to the forgiveness application process and maximizing the use of the funds to ensure that full forgiveness of these loans is realized.

Some of the most common questions related to forgiveness of PPP loans are answered below.

PPP FORGIVENESS APPLICATION On June 17, 2020, the SBA released two applications for PPP forgiveness: the Standard form and the EZ form. Both forms can be download directly from the U.S. Treasury website at https://home. treasury.gov/policy-issues/cares/assistance-for-small-businesses. The EZ form is most commonly used. Requirements for Form EZ: You must meet one of the following three criteria: 1. You are self-employed with no employees; 2. You did not reduce the wages of any employee earning less than $100,000/year by more than 25% during the covered period as compared to Q1 2020, and you did not reduce your FTE from January 1, 2020, through the end of the covered period (except for the allowable exceptions); OR 3. You did not reduce the wages of any employee earning less than $100,000/year by more than 25% during the covered period as compared to Q1 2020, and you were unable to operate during the covered period at the same level of business activity as before February 15, 2020, due to requirements established by the Secretary of Health and Human Services, CDC or OSHA. EZ filing is not based on the loan dollar amount. It is based on safe harbors and exemptions. There is some confusion around the number of employees and FTE requirements on the application. The number of employees is reported in the top section of the application, but FTE is used for the forgiveness reduction calculations. You must report both.