The Small Business Administration (SBA) recently issued a series of Frequently Asked Questions (FAQs) on the Paycheck Protection Program (PPP) which was passed as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).
FAQs Address Issues of Concern for Borrowers and Lenders
According to the document:
Borrowers and lenders may rely on the guidance provided in this document as SBA’s interpretation of the CARES Act and of the Paycheck Protection Program Interim Final Rule (“PPP Interim Final Rule”). The U.S. government will not challenge lender PPP actions that conform to this guidance, and to the PPP Interim Final Rule and any subsequent rulemaking in effect at the time.
Clarification Is Provided in Key Areas
Among the questions answered in this series of FAQs are the following:
- Does the PPP Interim Final Rule require the lender to replicate every borrower’s calculations?
- Are small business concerns required to have 500 or fewer employees to be eligible borrowers in the PPP?
- Does that exclusion of compensation in excess of $100,000 annually apply to all employee benefits of monetary value?
- Do PPP loans cover paid sick leave?
- Should payments that an eligible borrower made to an independent contractor or sole proprietor be included in calculations of the eligible borrower’s payroll costs?
- How should a borrower account for federal taxes when determining its payroll costs for purposes of the maximum loan amount, allowable uses of a PPP loan, and the amount of a loan that may be forgiven?
Contact Your Attorney for Further Information
If you have further questions after reviewing the FAQs, Vision Payroll recommends that you contact your attorney and your lending institution,
This week’s question comes from Carolyn, a business owner. I read recently about statutory employees and would like to find out if some of our new hires would qualify as statutory employees. Can you tell me more about statutory employees? Answer: Common law considers some workers employees and some independent contractors. By statute, some independent contractors are treated as employees for employment tax purposes.
There are four categories of independent contractors that might be statutory employees:
A driver who distributes beverages (other than milk) or meat, vegetable, fruit, or bakery products; or who picks up and delivers laundry or dry cleaning, if the driver is your agent or is paid on commission.
A full-time life insurance sales agent whose principal business activity is selling life insurance or annuity contracts, or both, primarily for one life insurance company.
An individual who works at home on materials or goods that you supply and that must be returned to you or to a person you name, if you also furnish specifications for the work to be done.
A full-time traveling or city salesperson who works on your behalf and turns in orders to you from wholesalers, retailers, contractors, or operators of hotels, restaurants, or other similar establishments. The goods sold must be merchandise for resale or supplies for use in the buyer’s business operation. The work performed for you must be the salesperson’s principal business activity.
If the independent contractor must perform the services personally as an explicit or implicit clause of the service contract, if the independent contractor does not have a substantial investment in the non-transportation facilities property and equipment, and the services are performed for the same payer on a continuing basis, then the payer must withhold social security and Medicare tax from payments to contractors.
For workers in categories 1 and 4 above who have payments subject to social security and Medicare tax under these rules, the payments are also considered wages for federal unemployment (FUTA) purposes. Payments to workers in categories 2 and 3 above are never considered wages for FUTA purposes.
Payments to statutory employees are never subject to federal income tax withholding.
Report payments to statutory employees on Form W-2, box 1, box 3 (to the wage limit), and box 5. Be sure to check the box 13 “Statutory employee” checkbox on the Form W-2. Statutory employees report the amount from Form W-2, box 1 on Form 1040, Schedule C, line 1 and complete the checkbox on that line. They may also deduct related business expenses on Schedule C, to the extent allowable by law.
Contact Vision Payroll if you have any questions on statutory employees.
The Internal Revenue Service recently released an updated version of Publication 15, (Circular E) Employer’s Tax Guide. In addition to providing information on classifying employees, determining which types of payments are considered wages for federal employment tax purposes, and depositing taxes, Circular E also provides updated tables for use in calculating the amount of federal income tax to be withheld using either the percentage method or the wage bracket method. Tables for both the percentage method and the wage bracket method of calculating the amount of any Advance Earned Income Credit Payment are also provided. Vision Payroll has already incorporated the updated tables into its tax calculations for paychecks and will begin using the updated tables for all wages paid during 2009. Contact Vision Payroll if you any questions on Publication 15.