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By Edward R. Jenkins Jr., CPA, CGMA

You may have heard that the Small Business Administration (SBA) Paycheck Protection Program (PPP) burned through the $349 billion that Congress authorized in the Coronavirus Aid, Relief, and Economic Security (CARES) Act, and that the SBA is no longer accepting applications. Do not let your clients panic. Congress is considering a second round of PPP SBA 7 loans for smaller businesses and the Employee Retention Credit is still available, so you will be called on to help.

Many CPAs have been tapped by their clients to help in several regards:

• Determining which relief programs are best for each client (remember, the choice is either/or)
• Gathering the necessary information to apply for a PPP SBA 7 loan and determining how much the client could borrow under the program (up to a maximum of $10 million)
• Estimating the amount of the PPP SBA 7 loan that will be forgiven.

Practitioners are not on an island, though. The AICPA has terrific support for CPAs on its website. Model engagement letters, application forms for the PPP SBA 7 loans, and tons of information and Excel templates for decision support tools are available. The PICPA also provides a wide array of valuable COVID-19 and PPP resources as well as a series of helpful webinars for members.

So, as we sit here in mid-April, what are a CPA’s next steps?

First, expect another round of PPP SBA 7 loan availability, and CPAs will be called upon to assist clients with gathering the documents necessary to apply and determining the amount of loan for which clients qualify. That means you must continue to issue engagement letters and adhere to repeatable best practices for providing decision support to clients. Remember, CPA professional ethics construe these services as nonattest corporate finance services; thus, an auditor could potentially provide these services and maintain unimpaired independence.

Now the fun starts: the forgiveness aspect of PPP SBA 7 loans. Congress has excluded this loan forgiveness from gross income in the CARES Act. CPAs will be called to assist clients in compiling the payroll costs, mortgage interest, rent, and other authorized costs to determine and document the amounts of the PPP SBA 7 loans to be forgiven.

If your client decided to opt for the Employee Retention Credit instead of a PPP SBA 7 loan, there is a lot of work involved in tracking the qualifying costs that are eligible for crediting in the payroll tax filings. In my experience, just getting payroll right each quarter under the best of circumstances requires a disciplined process. Now, CPAs will have to track payments related to the Families First Coronavirus Response Act (FFCRA). The FFCRA requires certain businesses to provide paid leave to workers who are unable to work or telework due to circumstances related to COVID-19, but it offsets the costs of providing the required leave with refundable tax credits against employment tax.

In addition to FFCRA amounts in the payroll tax returns, there are two other benefit streams running through the payroll tax systems: the Employee Retention Credit and a deferral of payment of payroll taxes through Dec. 31, 2020. CPAs will continue to be called on to aid in tracking eligible expenses for the Employee Retention Credit, as well as coordinate the recordkeeping with the client or the client’s payroll processor. If eligible expenses exceed the payroll tax liabilities, employers can file Form 7200 for a fast refund.

On top of the reductions of payroll taxes due and PPP SBA 7 loans with forgiveness, the CARES Act also allows for a deferral of payroll taxes during 2020. Those deferrals must be tracked and repaid in 2021 and 2022.

For CPAs, there’s a lot to do – quickly and with limited guidance. The three coronavirus relief bills were hastily drafted and there are a lot of unanswered questions awaiting further guidance. CPAs must remember to limit their risks associated with providing these services by making sure they have an appropriate engagement letter, and develop and employ best practices for decision support, documentation, and tracking.

Edward R. Jenkins Jr., CPA, CGMA, is professor of practice in accounting for Pennsylvania State University in University Park, managing member of Jenkins & Co. LLC in Lemont, and a member of the Pennsylvania CPA Journal Editorial Board. He can be reached at erj2@psu.edu.

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