Part 4 – The CARES Act Program: Tips for Loan Application

We want to make you aware of some important details that may affect your applications if you are electing to participate in the CARES Act program:

Confusion About The Deferral of Employer Payroll Taxes

The CARES Act provides that employers and self-employed individuals may defer:

  • Payment of the employer share of SSA payroll taxes (6.25%) owed on wages paid for the period ending December 31, 2020.
  • Such deferred taxes are due in two installments; 50% by December 31, 2021, and 50% by December 31, 2022.
  • Special note, this payroll tax deferral applies to ALL EMPLOYERS, with no requirement to show any specific COVID-19-related impact.
  • As a reminder, the deferral is not available to any employer that receives loan forgiveness with respect to the Paycheck Protection Program loan. See our previous CARES Act guidance. It is possible the deferral of the payroll taxes could be more beneficial than the loan forgiveness opportunity. Please contact your BKM Sowan Horan team member with any questions.
  • Make Sure You Use The Appropriate NAICS Code – Several clients have realized the NAICS Code they have been using is not the appropriate code. We recommend that the appropriate code be utilized in the circumstances and that the appropriate code be used consistently.

SBA Forms Were Updated on April 3, 2020

  • Clarification About Excluding Independent Contractors With Employer PPP SBA 7a Applications
    – Although the updated SBA form is not much different, in case you are asked to use the updated form, it is attached for your convenience.
  • The SBA also issued updated guidance clarifying that independent contractors should be EXCLUDED in the calculation of Average Payroll – See page 10 of the attached guidance. We believe this is intended to eliminate the duplication of an employer using amounts in the payroll calculation and the independent contractor filing separately under the EIDL program or the PPP.