To better assist our clients during this crisis, we have compiled a list of frequently asked questions and answers about how to obtain the information needed for the PPP to help you more quickly find what you need.

Q: How do I obtain the payroll report needed for the PPP? 

A: Our payroll partner, Gusto, has a special feature to automatically create the required report for the PPP. You can find the report under the COVID tab on the left side when you log in to Gusto or through the Reports tab. Most clients will use the default payroll report from 1-1-2019 to 12-31-2019, however, some that started payroll during 2019 may vary. If you fall into that category, please email us and we will promptly advise and assist. 

If the Reports option is not available, please email us and we will promptly enable those permissions. For the latest information from Gusto, visit the COVID section of their website that is specially created to assist small businesses during this crisis.

Additionally, you may need the report for Q1 of 2020 to verify if you had continuous payroll (i.e. have not laid-off employees). This report is also available in Gusto.

We recommend saving all reports to PDF and then creating a folder named PPP to store all payroll reports for easy upload to your lender.

Q: What other information do banks require to apply for the PPP? 

A: Banks vary in the information they require, but often the requirements will be:

• The date you commenced business. You can find this information:
  • On the SC Secretary of State website in the Business Search
  • On your Articles of Organization or Articles of Existence
  • On your business tax return, generally in the upper right-hand corner of page one on the 1120S, 1065, etc.
• Gross revenue from last filed business return, cost of goods sold if applicable
• Business and Primary Officer or Member contact information, household income
• Other officers if there are more than one. For LLC’s, only the primary member is required

Q: Where can I obtain a copy of my business’s quarterly tax documents? 

A: In Sharefile, each business client has a folder separated by year and then by quarter. Each quarterly folder contains the 941 (Employer’s Quarterly Tax Return) and the UCE 101/120 Quarterly Wage Report. In addition, the 12/31 folder also contains the 940 (Employer’s Annual Federal Unemployment (FUTA) Tax Return).

You can access Sharefile here, which is also available in the sidebar of our website or in the signature of our email. Your email address is used to log in, and the password is one that you have set in the past. If you have issues with your password, you can use the reset option if needed, and then record your new password somewhere safe.

If you have additional questions regarding the PPP, we ask that you please email us for prompt assistance from our staff. Due to the high volume of calls during this crisis, email allows us to better serve our clients with any PPP needs.

The chart below is courtesy of The University of Georgia Small Business Development Center (SBDC), which provides a way to quickly compare the aid available to small businesses.

This chart was accessed on April 8, 2020, and the information within is subject to change. While it is a helpful reference, we recommend visiting the US Treasury and Small Business Administration for the latest information.

This week has been filled with rapidly changing details surrounding the CARES Act and the benefits for individuals and businesses. In this post, we are focusing on summarizing the Paycheck Protection Program for small businesses with the latest information as of Friday, April 3.

We encourage everyone to consult official websites and press releases, such as the Small Business Administration, the US Department of the Treasury, and the IRS  for current and accurate information.

With regards to the Paycheck Protection Program, it is summarized on SBA.gov as follows:

The Paycheck Protection Program is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll.

SBA will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities.

You can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. You should consult with your local lender as to whether it is participating in the program.

Other details:

• Available for any businesses with under 500 employees, including sole proprietors, independent contractors, and self-employed individuals
• Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels
• At least 75% of the forgiven amount must have been used for payroll, but the loan may also be used for interest on mortgages, rent, and utilities
• The loan has a maturity of 2 years and an interest rate of 1%
• Loan payments will be deferred for 6 months
• View the PPP Fact Sheet from the US Treasury for more information regarding eligibility and forgiveness requirements

How to apply:

• Small businesses and sole proprietors may apply beginning Friday, April 3, independent contractors and self-employed individuals can apply beginning on Friday, April 10.
• You can apply through any existing Small Business Association lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating.
• View a copy of the PPP borrower application to see the information that will be requested when you apply with a lender.

Lenders and CPAs are grateful for your patience as we attempt to provide the best service to our clients during this time of uncertainty and change. Let us know if you have any questions regarding the Paycheck Protection Program with regards to your small business!

Late on Wednesday, April 1, 2020, the IRS gave an updated announcement that individuals who receive Social Security do not need to file an abbreviated return in order to receive their stimulus check. In the Treasury Department press release, Treasury Secretary Steven T. Mnuchin said, “Social Security recipients who are not typically required to file a tax return do not need to take an action, and will receive their payment directly to their bank account.” 

The IRS advises: “The IRS will use the information on the Form SSA-1099 and Form RRB-1099 to generate $1,200 Economic Impact Payments to Social Security recipients who did not file tax returns in 2018 or 2019. Recipients will receive these payments as a direct deposit or by paper check, just as they would normally receive their benefits.”

Let us know if you have any questions or if we can be of any assistance!

On Friday, March 27, President Trump signed the CARES Act into law, providing relief to Americans during this unprecedented event in recent history.

Page 35 of the CARES Act (available to view here) begins the details regarding the relief available to individuals, families, and businesses.

Below is a summary of the rebates for individuals and families described in the CARES Act: 

• Individuals with up to $75,000 of adjusted gross income will receive the lesser of $1,200 or their net income tax liability (with a minimum of $600)
• Joint filers with an adjusted gross income of up to $150,000 will receive the lesser $2,400 or their net income tax liability (with a minimum of $1,200)
  • Taxpayers will receive an additional $500 for each qualified child
  • Rebates will be reduced by $50 for each $1,000 in adjusted gross income above the thresholds listed above, capping out at $99,000 for individuals and $198,000 for joint filers

Other requirements:

• You must have a work-eligible Social Security number
• You must not be a nonresident alien
• You must not be claimed as a dependent
• Estates and trusts are not eligible

Additional information:

• If you have not filed your 2019 tax return, your 2018 tax return will be used to determine your eligibility
• If you have bank account information on your tax return, your rebate will be credited directly to your account in around 3 weeks (source: Treasury Secretary Steven Mnuchin)
• If you do not have bank account information on your tax return, your rebate will be mailed to you as a check, which may take a few months to arrive

We are available to support our clients during this crisis by phone or email. Check our blog soon for additional analysis of benefits from the CARES Act.

With the uncertainty surrounding COVID-19, at Woodruff Accounting we want to keep you informed with the latest changes from state and federal agencies that impact your taxes.

Federal Taxes

At 10:04 am on Friday, March 20, US Treasury Secretary Steven Mnuchin announced that both the payment and filing deadlines for federal income tax returns have been moved to July 15th, giving individuals, businesses, and tax preparers additional time to submit returns. No interest or penalties will be applied to payments made by July 15th.

Read the news update from CNBC here. 

South Carolina:

The SC Department of Revenue (SCDOR) announced on March 17th that tax returns and payments due between April 1 and June 1 are now due on June 1, 2020, with no interest or penalties applied to payments made by June 1. This provision includes South Carolina Individual Income Taxes, Corporate Income Taxes, Sales and Use Tax, Admissions Tax, Withholding Tax, and other taxes administered by the SCDOR. Read the full news release from the SCDOR here.

We will continue to update this page as news unfolds. Let us know how we can assist with your tax needs at any time at woodruffacct@gmail.com, or book a phone appointment on our website using the Book Appointment tab. 

Today on the Woodruff Accounting blog, we wanted to share a quick reference guide for the retirement contribution limits that you can make each year (as of February 2020). Additionally, the deadline to make 2019 contributions to an IRA is April 15.

IRS information on this topic can be found here.

Woodruff accounting would love to partner with you in saving for retirement and understanding its implications for taxes. If you have any questions, feel free to contact us.

As tax season begins once again, we want to draw your attention to a convenient tool on our website that we use to schedule appointments and phone calls during this busy time.

You will see the “Book an Appointment” tab on the left side of our website menu. From there, our partner Calendly will guide you to select the length appointment or call that you would like to schedule and provide you with a list of available times to choose from. Once complete, you will receive an email confirmation and your appointment will be added to our Woodruff Accounting calendar.

We hope that this scheduling tool will help us provide both our clients and potential clients with the best possible service during tax season. If you have any questions, feel free to email us at woodruffacct@gmail.com.

We talk a lot about Reasonable Compensation for S Corporation shareholder-employees here at Woodruff Accounting, and it is a vitally important concept for small businesses. The IRS requires for reasonable compensation to be paid to shareholder-employees before any non-dividend distribution can be taken, though S corporations are not required to pay the reasonable compensation if they would rather defer it until later.

Authors Paul S. Hamann & Jack Salewski, CPA, CGMA write on “RCReports.com” about this concept of when and how to take reasonable compensation, especially in instances where your company may not be able to afford to pay the compensation. Keep reading for an excerpt from their article titled, “What if an S Corp Owner can’t afford to pay Reasonable Compensation?”, or visit RC Reports for the full article, which includes several examples to help illustrate this concept.

“Depending on the company’s financial condition and business strategy, a shareholder-employee may be able to take Reasonable Compensation plus a distribution, just Reasonable Compensation, or neither. What the shareholder-employee can’t do take a distribution instead of Reasonable Compensation.

To help you better understand, let’s run through a few simple scenarios and then move onto some more advanced ones. Keep in mind the following:

1. Reasonable Compensation is defined by the IRS as: “The value that would ordinarily be paid for like services by like enterprises under like circumstances.” or the hypothetical “Replacement Cost” of the shareholder-employee.
2. Reasonable Compensation is based on the value of services provided (Hypothetical Replacement Cost), not profit, distributions or the amount the company can afford to pay.
3. Wages (Reasonable Compensation) should be paid BEFORE distributions are made.
4. A shareholder-employee can take wages (Reasonable Compensation) without taking a distribution, but not vice versa.
5. A shareholder-employee who does not want to take any Reasonable Compensation can refuse all compensation (distribution), and play ‘catch up’ in a later year.

Reasonable Compensation is derived from the value of the services provided, not the profit or loss of the business.  While Reasonable Compensation has nothing to do with profit and loss, it does relate to Distributions.  Why? Because the IRS guidelines for Reasonable Compensation state: The amount of reasonable compensation will never exceed the amounts received by the shareholder either directly or indirectly.  It does not mention profit or loss at all but instead talks about ‘amounts received’ by the shareholder.  It does not matter if the company is making or losing money; what matters is whether or not the S Corp owner is taking money (e.g. a distribution or other items of value) out of the S Corp.

Anything that compensates the S Corp owner can be re-characterized as wages, including personal expenses paid by the S Corp or loans to the S Corp owner.  At the end of the day a distribution of any kind triggers the requirement to pay Reasonable Compensation for services provided.  Best practice is to know what the value of those services are and pay that amount in Reasonable Compensation before taking a post-wages distribution of any kind.“