If you are a business owner who received a Paycheck Protection Program (PPP) loan, no doubt, you’ll want to get the loan forgiven. After all, forgiveness is the intent behind the legislation that made PPPs available in order to help small businesses in a time of great uncertainty due to the coronavirus pandemic.

Millions of businesses have received these loans. The next step is to apply for forgiveness.

The Small Business Administration (SBA) released the application for forgiveness last Friday, May 15.

The application, which is available online or through your PPP lender, is 11 pages long; only three pages need to be filled out (the two-page application and the one-page Schedule A); the remaining pages are instructions and worksheets. You can find the application here: //tinyurl.com/yd9j4lbj. This application is fillable (that is, you can type in your answers online).

Before you tackle the job of completing the application, I recommend studying the instructions carefully, with a special focus on these terms: eligible payroll costs, covered period, alternative payroll covered period and eligible nonpayroll costs.

It will help you to think about how your business fits within those definitions and what documentation you will need to support your answers. Payroll costs will be most important to understand, since “at least 75% of the potential forgiveness amount” has to be used for payroll costs.

There are some nuances that need to be understood. For example, when calculating payroll costs, which is done on a worksheet in the application, individuals earning more than $100,000 are capped at $15,385. That’s the eight-week equivalent of $100,000 per year.

Payroll costs include employer contributions to employee retirement plans, but not pre-tax or after-tax contributions by employees, such as employee elective contributions to 401(k) plans.

They also include the employer’s costs of employee health insurance, but not employees' pre-tax or after-tax health insurance contributions.

Also included are employer taxes assessed on employee compensation, but not taxes withheld from employee earnings.

The application will have to be submitted to the lender with documentation to support the payroll costs entered on the application.

After getting a handle on the types of costs that can support the forgiveness request, be sure you understand timing. The date you received the PPP loan is the start date for calculating the payroll costs during the “covered period,” which is eight weeks long, or 56 calendar days.

As an example provided in the application, assuming you received the PPP loan on April 20, the covered period is from April 20 through June 14.

That timeframe may not fit your regular payroll cycle, which would make sticking to the covered period administratively difficult. The SBA anticipated that issue and provided a solution: an “alternative payroll covered period.”

The alternative, which will probably be used by most businesses, allows you to use the dates of your actual payroll.

Continuing the example with April 20 as the date of receipt of PPP funds, say the first pay period after that is April 26, then the alternative covered period is April 26 through June 20. You’ll find this example in the application.

One more very important point: It’s a crime to knowingly make a false statement on the application, with monetary fines and prison sentences for those who break the law, so take the application process very seriously.

If you need help, there are a number of law firms and accounting firms that are developing expertise with these applications. It may be worth your while to consider engaging their help. You can find these experts online.

I will be writing more on this topic as the SBA issues additional guidance and posting updates on my website, www.juliejason.com.

For a quick video that covers the topics we’ve discussed in today’s column, go to vimeo.com/421629229.

Julie Jason, JD, LLM, a personal money manager (Jackson, Grant Investment Advisers Inc. of Stamford, Connecticut) and award-winning author, welcomes your questions/comments (readers@juliejason.com). Please visit www.juliejason.com.

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION

When you were a child, did someone in your family talk with you about investing in stocks? I remember a grade school substitute teacher of mine telling the class about how she received a gift of Coca-Cola stock from her grandfather. My teacher recounted that, as a teenager, she felt proud to own the company that made the drink her friends favored when they went out for burgers and fries. I recall her telling us how she held on to that stock “forever.” She also said that the value of the stock had grown more than her savings account.

I remember this teacher and her story, even though I was only 10 at the time.

As a longtime proponent of financial literacy education, when it comes to investing, I know that mentorship can be more important than a lesson plan.

That brings me to you.

In these uncertain times, wouldn’t it be nice to trigger a spark of interest in the young people in your life so that they can become investors? It doesn’t take much. It was the gift of stock that empowered my teacher to be a mentor. I heard her message and took it in. I’m sure I wasn’t the only one she influenced.

Since I make my living as a professional money manager, I don’t talk about stocks in my column unless there is a good reason for an exception and I provide a disclosure (I do own the stocks I’m mentioning in this column). Just be sure not to take this conversation as a recommendation to go out and buy any stocks I write about; pick stocks only with your financial adviser’s guidance, or, if you are a do-it-yourselfer, only after careful research.

To develop an interest and love of investing, the stock you pick for a child has to have two important characteristics: 1) The company’s products need to be recognizable by the child and 2) the company’s business needs to be sustainable, since you would want the child to have my teacher’s experience of holding on to it through good markets and bad -- that’s a lesson in itself considering where we are now, during the very volatile coronavirus pandemic market.

I’m sure you can think of a few stocks that fit the characteristics I mentioned. For example, if your kids light up when you suggest a visit to McDonald’s (MCD), consider that stock. If your child brushes his or her teeth with Crest toothpaste, consider Procter & Gamble (PG).

Coca-Cola, McDonald’s and Procter & Gamble are components of the S&P 500 Dividend Aristocrats Index, which includes stocks that have increased their dividends for the past 25 consecutive years and have capital appreciation potential.

Studies show that stocks with rising dividends outperform others over time -- with an emphasis on “over time.” The total return of the S&P 500 Dividend Aristocrats Index (-23.3%) is lower for the first quarter of this year (2020) than the usually more volatile S&P 500 index (-19.6%). That can happen.

Start your research online at morningstar.com, a provider of independent investment research. Explore the AAII.com website. AAII (The Association of Individual Investors) is a nonprofit organization whose purpose is to educate individual investors. At valueline.com, you’ll be able to explore stock research reports with a free trial.

You'll find all of the stocks chosen for the S&P 500 Dividend Aristocrats Index on the standardandpoors.com website at tinyurl.com/lxk9nxp. To see the actual stocks, you have to go to the S&P 500 Index on the site, click on “Additional Info,” then click on “Indicated Rate Change” to download the Aristocrats spreadsheet.

If you are hesitant to do stock research, mentor a child on how to put money to work with a stock index fund. The oldest index fund for individual investors is the Vanguard S&P 500 Index Fund (VFINX). You’ll want to research Vanguard’s website at www.vanguard.com. Vanguard is one of the world’s largest mutual-fund companies.

There is nothing better than a gift that educates or a story that inspires.

Julie Jason, JD, LLM, a personal money manager (Jackson, Grant Investment Advisers Inc. of Stamford, Connecticut) and award-winning author, welcomes your questions/comments (readers@juliejason.com). Please visit www.juliejason.com.

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION

It now seems like decades ago, but it has been only a matter of weeks since the Coronavirus Aid, Relief and Economic Security (CARES) Act was signed into law (March 27). When we first talked about the act, legislators were hearing from small-business owners who were anxious about the future of their businesses -- and that’s what led Congress to set up the Paycheck Protection Program (PPP). Since then, the Small Business Administration (SBA) has processed more than 3.8 million loans, totaling more than half a trillion dollars of economic support.

Some of those businesses that received loans will be complying with rules allowing for forgiveness of up to 100% of the loan.

The rules are pretty rigid. According to the SBA, the loan proceeds must go to payroll costs, rent, utilities and interest on mortgages, with 75% of the forgiven amount having been used for payroll. In addition, the employer must be able to show that the business maintained or quickly rehired employees, maintaining salary levels. The amount of forgiveness will also depend on full-time headcount and salaries and wages; if those amounts decrease, forgiveness decreases.

Business owners are asking about what counts as “payroll costs.” The SBA issued guidance on that question and many others, which can be found at https://www.federalregister.gov/documents/2020/04/15/2020-07672/business-loan-program-temporary-changes-paycheck-protection-program.

The list of payroll costs includes: “compensation to employees (whose principal place of residence is the United States) in the form of salary, wages, commissions, or similar compensation; cash tips or the equivalent (based on employer records of past tips or, in the absence of such records, a reasonable, good-faith employer estimate of such tips); payment for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums, and retirement; payment of state and local taxes assessed on compensation of employees; and for an independent contractor or sole proprietor, wages, commissions, income, or net earnings from self-employment, or similar compensation.”

What’s excluded from the definition of payroll costs? The CARES Act excludes the following:

“i. Any compensation of an employee whose principal place of residence is outside of the United States;

“ii. The compensation of an individual employee in excess of an annual salary of $100,000, prorated as necessary;

“iii. Federal employment taxes imposed or withheld between February 15, 2020 and June 30, 2020, including the employee's and employer's share of FICA (Federal Insurance Contributions Act) and Railroad Retirement Act taxes, and income taxes required to be withheld from employees; and

“iv. Qualified sick and family leave wages for which a credit is allowed under sections 7001 and 7003 of the Families First Coronavirus Response Act (Pub. L. 116-127).”

So, understanding how the PPP loan can be used in order to qualify for forgiveness, like many other things, is a matter of following the rules.

Some new issues have arisen. According to a notice (https://www.irs.gov/pub/irs-drop/n-20-32.pdf) issued last week, the IRS has concluded that business expenses paid for by a PPP loan that is forgiven cannot be deducted as business expenses. Sen. Ron Wyden called this a “gut punch” for businesses struggling to stay afloat.

In response, Sen. Marco Rubio, chairman of the Senate Committee on Small Business and Entrepreneurship, joined by Sens. John Cornyn, Senate Finance Committee Chairman Chuck Grassley, Finance Committee ranking member Ron Wyden, and Tom Carper, introduced new legislation (Small Business Expense Protection Act) to clarify that small businesses can deduct expenses paid with a forgiven PPP loan from their taxes.

“The congressional intent of the PPP program was to keep workers connected to their jobs and to ease the financial burden on small businesses so they could weather this pandemic,” Rubio said. “Borrowers should not be penalized by new taxes because they sought help during this unprecedented crisis.”

We’ll see whether the bill will be passed.

In the meantime, to keep current on developments, which I’m sure will be coming, check out the SBA’s website (www.sba.gov). If you have questions about a PPP loan that you have already received, I highly recommend contacting the Lender Relations Specialist in the local SBA Field Office. A list of offices can be found here: https://www.sba.gov/tools/local-assistance/districtoffices.

For a quick video that covers the topics we’ve discussed in today’s column, go to vimeo.com/416409979/98d2ad33d1.

Julie Jason, JD, LLM, a personal money manager (Jackson, Grant Investment Advisers Inc. of Stamford, Connecticut) and award-winning author, welcomes your questions/comments (readers@juliejason.com). Please visit www.juliejason.com.

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION