By now, we have all heard the SBA has released the forgiveness application for those in receipt of PPP money. It’s SBA Form 3508. Along with the rules issued by the SBA on May 22, 2020, it contains some surprises. For instance, would you think businesses could pay employee bonuses with PPP money? Take off your professional advisor hat for a moment. Just from a standpoint of equity, should free government money be utilized to cover bonuses in addition to eight weeks (or perhaps soon by legislation, 16 or 24 weeks) of payroll? Well, I think a lot of people would be surprised to learn that bonuses may be included in the calculation of payroll costs if the employee’s total compensation does not exceed $100,000 on an annualized basis. But PPP was touted as a lifeline to struggling businesses to preserve employment and ostensibly baseline wages. Restaurant workers, grocery stockers, garbage disposal workers, and even some medical personnel typically don’t receive bonuses. Wasn’t PPP for them and not for employees approaching six-figure compensation and perhaps better able to ride out this pandemic?
Because I like wholly unrelated tangents, continue to further indulge me and consider this. I promise it will come into focus and be illustrative of a larger point. IRS lists the following on its website as Question 30 of the Economic Impact Payment FAQs.
Q30. What if a child’s parents who are not married to each other both got the $500 for a child – will one of them have to pay that back? (updated May 15, 2020)
A30. There is no provision in the law requiring repayment of a Payment. Instead, each parent should review Notice 1444, Your Economic Impact Payment, that the IRS will mail to their last known addresses within 15 days after the Payment is made. The parents should keep the notices for their 2020 tax records.
Huh? Wait. What? The rebate payments for children are $500, not $1,000. IRS wrongfully issued $500 payments and isn’t seeking to get those payments back? Why not? Deficit hawks are up in arms just thinking of the increasing debt load kicked down the road to the future. Treasury and SBA have been doing an incredible job issuing timely guidance on programs to quell the horrific economic effects of COVID-19. Some surprising results from the rebate checks and bonus payments under PPP, though, have come to fruition. To learn more, take our latest course on PPP loan forgiveness, Loan Forgiveness for Paycheck Protection Program Loans (PPP3). You’ll be glad you did.
Nick Spoltore is VP of Tax & Advisory Content for Surgent CPE. Mr. Spoltore is a graduate of the University of Notre Dame and of Delaware Law School. Before joining Surgent, he practiced tax and business law at the firm of Heaney, Kilcoyne in Pennsylvania and also in Delaware.
