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Paycheck Protection Loans until March 31, 2021 SHORT DISCUSSION

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Second Draw Loans – 

If you received an initial PPP loan, you can qualify for a second round (called a “second draw”) of PPP tax-free money.

To qualify for the second-draw PPP money, you must

  1. have 300 or fewer employees;
  2. have suffered a 25 percent or greater loss in revenue during at least one quarter of 2020 when compared to 2019; and
  3. have already used your original PPP money (or be planning to use it soon).

The mechanics of the second-draw PPP loan amount follow the rules that apply to the original (first-draw) PPP loan, with some modifications. The overall limits work as follows:

  • The loans are capped at $2 million or less.
  • If you are not a hotel or restaurant (NAICS code 72), you identify your average monthly payroll for either 2019 or the trailing 12 months, and then multiply it by 2.5 to find your loan amount.
  • If you are a hotel or restaurant, you multiply by 3.5.

During a period of your choice, beginning eight weeks from the origination date of the loan and ending 24 weeks after the origination date, you must use 60 percent or more of the monies for defined payroll in order to achieve 100 percent forgiveness.

Expenses that can qualify for forgiveness include:

  • Payroll
  • Rent
  • Interest on mortgage obligations
  • Utilities
  • Operations expenditures
  • Property damage
  • Supplier costs
  • Worker protection

1st Draw Loans

If you did not receive a PPP loan previously, you may qualify for one now.  If you are a first time recipient, you do not have to show a revenue decline, you just have to certify” “current economic uncertainty makes this loan necessary to support the ongoing operations of the Applicant.”    There are also slightly different rules then above such as a 500 employee limit instead of 300 and operation expenditures, property damage, supplier costs and worker protection do not qualify.  This is not a comprehensive list so please contact me if you need help.

And finally, keep these three thoughts in mind:

  1. Act fast, because this money goes in a hurry.
  2. The incoming PPP loan monies are tax-free for IRS purposes (at this point, they are taxable for California purposes).
  3. Expenses paid with PPP loan monies that are forgiven are tax-deductible.

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Contact Information

Moore Messina Webb LLP.
2237 Douglas Blvd. Suite 140
Roseville, CA 95661

Phone: (916) 784-1040

Directions to Moore Messina Webb LLP.

Link to MMW CPA

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