It is becoming increasingly difficult for small businesses to pilot through the shifting information trends during this COVID-19 pandemic. Most business owners are not current on details related to the available coronavirus relief programs, e.g., the Paycheck Protection Program. Many are trying to find the answer to a common question: how to proceed if the PPP funds have already arrived.
Businesses that have received the funds must begin to maintain detailed records indicating how the money is being spent. Having meticulous expense reports is the only way to ensure you won’t have to rwon’tthe loan, including any portions left behind. While the guidelines related to PPP loan forgiveness remain transparent, maintaining thorough expense reports will assist in eliminating future challenges.
How to Record Paycheck Protection Program Expenses
The following is a look at how to use QuickBooks online to track your expenses. If you aren’t well-versed in small business accounting tips, consult with an accountant.
1. Start by Setting Up the PPP Loan Account
You must note that this loan will continue to be a liability. This will continue until it’s established that much of the initial amount is to be forgiven.
As such, your Carmel accountant should advise you to create a long-term li’longty’ account for it.
2. Create a Paycheck Protection Program Bank Account
As things stand, it may take a while before your business manages to open a bank account. But anyone well-versed in business accounting tips shouldn’t shouldn’t come up with a solution.
A good starting point would be establishing a different bank account on your business books. Use this account to note down the PPP loan disbursed and the money paid out to cover expenses.
Be sure to name this account “PPP Bank.”
“. Note the” PPP Loan Income
Proceed to structure a vendor for the loan. PPP loan tracking will require establishing whether the lending institution has already been registered as a seller.
You can now consider creating a similar vendor using an allied extension, e.g., “the name of “the lending facility”—PPP credit.”Once the setup process is complete, you can set the with depositing
4. Record All Your Expenses
Just because you have set up a new PPP loan doesn’t mean you should forget about the Business Checking account. It would be best if you continued making expense payments as is the norm.
Every time you pay from the Business Checking, reimburse it from the account you created for the PPP funds. You can do this through the “Write Check” operation.
“An important point to remember is to never get tempted to combine expenses or payments. Additionally, double-check the memo fields to confirm you have provided the correct descriptions.
Where possible, try to include documentation in the form of attachments.
5. Generate Reports
Using this method, you get to maintain a good trail of PPP related Income and Expenses. It’s preferable to use it, as the newly created PPP bank account won’t indicate anything in terms of the expense type.
You will have no option but to generate a custom report to get an expense statement. On the other hand, you may need to transpose the information to an Excel document to enable you to report the loan.
Eligible PPP Expenses—What Are They?
Are you wondering, “What are Eli”real PPP expenses?” Eligible PP” expenses include the following:
- Utilities, e.g., internet, electricity, telephone, water, and gas. For a bill to be considered, the billing must have started before Feb 15th, 2020.
- Payroll costs and ensuing benefits
- Rent under-occupancy treaty, which must have been in place by Feb 15th, 2020
- Interest on all your mortgage obligations which you had incurred before Feb 15th, 2020
What Is Counted in the Payroll Costs?
Tracking your PPP loan expenses will help you understand what counts as payroll costs. Costs included under this category are:
- Tips, salaries, commissions, or wages with a $100,000 annual cap for each employee
- Personnel benefits include allowance, vacation, sicAllowancecal leave, and family and parental costs. Other costs covered under benefits include:
o Allowance for dismissal Allowancetion
o Expenses incurred in providing group health care benefits, e.g., payment of retirement benefits and insurance premiums.
- Local and state taxes calculated on compensation
- For independent contractors or sole proprietors: net earnings or income, commissions, or wages capped at $100,000 annually for each staff member.
Additional Factors You May Need to Know About PPP
- Once received, you have a maximum of 8 weeks to spend the funds
- When the application for the PPP funds gets submitted, your business can’t delay granting the loan. The same also applies to the spending terms.
- For loan forgiveness, the business will need to submit an application
- If there are any remaining or unspent funds, they will be deemed as the unforgiven part of this PPP loan. This means that any amount not spent within the eight weeks has to be repaid in full.
- A forgiven loan doesn’t carry any federal tax liabilities. So far, no determination has been made about state tax liabilities.
- Are you wondering if your small business can rehire new employees instead of calling personnel that it had laid off? Well, this is also yet to be determined.
- You can apply for other resources, such as Lendio, Fundera, and Business2Credit, in addition to banks.
If you haven’t received a PPP loan, it’s still possible to continue tracking the coronavirus costs. Try to keep track of all the costs associated with this virus. You can do so by creating a line item in the existing accounting system to assist you in tracking coronavirus costs.
Would you like to learn more about tracking PPP loan expenses? Contact Savage Accountancy, APC, by calling (831) 298-5175 or visiting this link.