As PPP Round II opens up this week, millions of business owners are going to struggle to figure out if they are qualified for the program.
You are eligible for the program if your gross receipts in one calendar quarter of 2020 are down at least 25% compared to the same quarter in 2019, or you are down 25% overall for 2020 compared to 2019.
Now let’s try to break this down in English. The first thing you have to do is determine if you report your taxes on a cash or accrual basis. Ask your accountant if you are not sure.
If you report on a cash basis:
Figuring out if you are qualified is relatively simple. You can print out your bank statements and compare your deposits (PPP money is excluded)
If you report on an accrual basis:
This scenario gets a little trickier. You need to go into your accounting software and run quarterly comparative reports on an accrual basis. If you’re not sure how to do this, check with your accountant.
A few other important points
You have to compare actual calendar quarters. You can not use, say, March, April and May, as an example.
If your PPP loan is for under $150K, you don’t need to prove a revenue decline at application. You will have to provide it as part of the forgiveness process. Applications greater than $150K will require proof at application.
Keep in mind that even if you meet the thresholds, you will still be required to represent that you need the funds to support your business's ongoing operations. Information about your loan will ultimately be made public.
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