What every dentist should know about Paycheck Protection Program (PPP) loan forgiveness

While the safety of patients and staff continues to take top priority for dentists, the coronavirus response legislation is rapid. An understanding of the CARES Act is crucial, and every area of the business can benefit from a sense of timeliness.

This includes the Paycheck Protection Program loans that made it possible for a dentist and staff to return to their roles as oral health care providers earlier this year.

Cain Watters & Associates, L.L.C, a nationwide CPA and financial services firm, specializes in educating and guiding the dental community in financial principles. Here they share insight for dentists to consider on PPP loan forgiveness: determining when to apply, preparing all the necessary information to complete the process and factoring in which expenses are applicable.

4 steps to take before beginning the PPP loan forgiveness application process

1.  Consult the experts. A financial advisor or CPA can assist and guide in preparing an application, but the lender is the first stop in the process. Ultimately, a PPP lender will submit the application to the U.S. Small Business Administration after reviewing for accuracy, according to their standards for underwriting.
2.  Confirm the facts. To begin the application process, an applicant should have at the ready:
   * a copy of the PPP loan,
   * payroll reports,
   * FTE, or Full Time Equivalent, reports, and
   * documentation for other expenses (rent, utilities and mortgage interest). Verify the covered period selected for the loan (either eight or 24 weeks), and the loan disbursement date (when the funds reached the account). Review the total amount of funds borrowed, then calculate the dollar amount dedicated to payroll expense.
3.  Consider your options. Apply now or apply later? On October 8, 2020, the U.S. SBA, working with the Treasury Department, released a simpler loan forgiveness application for PPP loans of $50,000 or less. In that announcement they stated they will “continue to favor additional legislation to further simplify the forgiveness process”. Loan forgiveness applications are not due until the covered period expires, plus an additional 10 months.For instance: If a dentist received a PPP disbursement June 1, 2020 with a 24-week coverage period, they are not required to apply until July of 2021. — For PPP loans in excess of $150,000, if all the funds have been exhausted, the borrower can begin the process of applying for forgiveness now.
   — For PPP loans under $150,000, a bit of patience might be prudent. Currently, a bill in front of U.S. Congress, if approved, may allow automatic forgiveness for loans under $150,000, with certification from the borrower that funds were used appropriately. The October 8 announcement mentioned above suggests that more efforts to simplify the process may be on the horizon.
4.  Factor in feelings. Emotionally, dentists might want to send 2020 on its way, along with the loans and paperwork it generated, and they can certainly begin the process. From a practical standpoint, though, applying now for forgiveness of a PPP loan under $150,000 might generate more work than will ultimately be required.

What can influence loan forgiveness?

Discussions that took place back in April may be difficult to recollect. A few reminders now might help dentists avoid unpleasant surprises later in the process.

· Payroll percentage matters. Sixty percent of every PPP loan must be designated to payroll.

· EIDL grants offset loan forgiveness. Any dentist who received an EIDL grant, which offered $1,000 per employee, up to $10,000, will owe a minimal amount on their PPP loan.

For instance: If a dentist received a $100,000 PPP loan and an $8,000 EIDL grant, even if they achieve 100 percent forgiveness, $8,000 will still be outstanding.

· Full Time Equivalent (FTE) status matters. Though the entire PPP loan amount was designated for payroll expenses, any shift in FTE numbers can affect the amount of loan forgiveness achieved. Exemptions exist and are worth review. For instance, if a dentist offered employees the opportunity to return to work and the employees refused, the Safe Harbor Exemption rules may be effectively used to achieve 100% forgiveness.

· Documentation is crucial, and expert advice a valuable resource. Don’t hesitate to consult a professional when questions arise.

Ready to streamline the process? Here’s a head start.

1. Remember to bring the original loan document on Small Business Administration letterhead when applying for forgiveness.
2. Wait until the amount borrowed is exhausted via payroll over the extended 24-week period for PPP. In most cases, this will eliminate the need to pinpoint receipts for other expenses. Extracting reports from a payroll website using knowledge of the correct time periods for employment can provide most of the documentation required. Up to five different reports for payroll and FTEs exist, so be sure all the bases are covered.
3. Determine which forgiveness application to use. The EZ form is an option for a self-employed dentist or a sole proprietorship. Also, it can be used for a practice owner who did not reduce the salary of employees by 25 percent or more during the covered period and rehired all FTEs. Also, form 3508S is now available for those who received a loan of $50,000 or less.

CWA will continue to provide updates as they are announced. Stay current on the latest legislation and more at cainwatters.com/digitalblogs.

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Keith Klein, CPA and Financial Planner with Cain, Watters and Associates, L.L.C. is an alumnus of Texas Tech University where he received both a Bachelor of Arts and Master of Science in accounting. He spent the first seven years of his career as an auditor at PricewaterhouseCoopers, becoming a manager before he left in 2010 when he joined Cain Watters and Associates. His experience helped him quickly establish his own planning team. Keith has worked seamlessly side by side with his clients as they navigate their financial plan. He is a Certified Public Accountant, an Investment Advisor Representative and a member of American Institute of Certified Public Accountants. Reach him at cainwatters.com

Cain Watters & Associates LLC is an investment advisor registered with the Securities & Exchange Commission. Information provided does not take into account individual financial circumstances and should not be considered investment advice to the reader. Request form ADV Part 2A for a complete description of CWA’s financial planning and investment advisory services. There is no assurance that other client actual results will be similar to information presented. Estimated future results may not be obtained due to economic, business and personal circumstances.