All posts by CHR-Admin

Congruity Letter for PPP Loans (Apr 13, 2020)

  • April 13, 2020
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To Whom It May Concern:

This loan applicant is a client of a professional employer organization (PEO). PEOs provide payroll, employee benefits, human resources, and compliance assistance services to more than 175,000 small business clients with more than 3.7 million employees nationwide. PEOs “co- employ” their clients’ employees. The employees are paid on the PEO’s federal employer identification number (FEIN), not the client’s. Therefore, a PEO client applying for a loan through the Paycheck Protection Program (PPP) will not have a Form 941. However, the FAQs issued on April 6, 2020 by the Small Business Administration and the U.S. Treasury Department expressly state that PEO documentation is acceptable for lenders to use when determining wages and payroll taxes for a PEO client's PPP loan application.

Question 10 of the FAQs states as follows:

Question: What if an eligible borrower contracts with a third-party payer such as a payroll provider or a Professional Employer Organization (PEO) to process payroll and report payroll taxes?
Answer: SBA recognizes that eligible borrowers that use PEOs or similar payroll providers are required under some state registration laws to report wage and other data on the Employer Identification Number (EIN) of the PEO or other payroll provider. In these cases, payroll documentation provided by the payroll provider that indicates the amount of wages and payroll taxes reported to the IRS by the payroll provider for the borrower’s employees will be considered acceptable PPP loan payroll documentation. Relevant information from a Schedule R (Form 941), Allocation Schedule for Aggregate Form 941 Filers, attached to the PEO’s or other payroll provider’s Form 941, Employer’s Quarterly Federal Tax Return, should be used if it is available; otherwise, the eligible borrower should obtain a statement from the payroll provider documenting the amount of wages and payroll taxes. In addition, employees of the eligible borrower will not be considered employees of the eligible borrower’s payroll provider or PEO.

Accordingly, the SBA allows PEO clients to rely on payroll records provided by their PEOs to support the PPP loan application. In accordance with this guidance, the PEO has provided an authenticated payroll record to assist you, the lender, in confirming the client employer’s eligibility for the loan, and the loan amount.

Please call our office if further clarification is required. I can be reached directly at 336-408-8661.

Regards,

Darrin Hunter

Darrin Hunter President, Congruity HR

Updated 4/7/2020

Update: PEO Clients Eligible for PPP Loans (Apr 7)

  • April 8, 2020
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Lenders do not need 941s or other tax documents from a PEO client in order to qualify for a Payroll Protection Program (PPP) loan. As per the US Treasury Department's FAQ on Paycheck Protection Program (PPP) Loans, Question 10:

Question: What if an eligible borrower contracts with a third-party payer such as a payroll provider or a Professional Employer Organization (PEO) to process payroll and report payroll taxes?

Answer: SBA recognizes that eligible borrowers that use PEOs or similar payroll providers are required under some state registration laws to report wage and other data on the Employer Identification Number (EIN) of the PEO or other payroll provider. In these cases, payroll documentation provided by the payroll provider that indicates the amount of wages and payroll taxes reported to the IRS by the payroll provider for the borrower’s employees will be considered acceptable PPP loan payroll documentation. Relevant information from a Schedule R (Form 941), Allocation Schedule for Aggregate Form 941 Filers, attached to the PEO’s or other payroll provider’s Form 941, Employer’s Quarterly Federal Tax Return, should be used if it is available; otherwise, the eligible borrower should obtain a statement from the payroll provider documenting the amount of wages and payroll taxes. In addition, employees of the eligible borrower will not be considered employees of the eligible borrower’s payroll provider or PEO.

COVID-19 Information About Forgiveable Loans

  • March 29, 2020
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Hope you are all staying safe during this time. Please know that Congruity HR has taken measures to insure we stay operational during this time.

Please note that we are researching hourly/daily as things progress to provide you with the most up to date and accurate information. Our staff is available to help you with any questions.

While lenders have not yet released application guidelines but are expected to imminently, now is the time to compile payroll records to support your loan request. Congruity HR will begin Monday morning to prepare these forms for you.

Actions You Can Take Immediately

Late Friday, President Trump signed into law the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), providing $2 trillion in stimulus funding. The CARES Act includes several measures to help small businesses including a forgivable loan called the Paycheck Protection Loan, which is intended to encourage employers to retain and re-hire employees.

Small businesses (companies with 500 or fewer employees) can apply for the loan through banks that make the loans on behalf of the Small Business Administration (SBA), which administers the Paycheck Protection Loans program. Certain businesses with larger headcounts also qualify. You can check industries eligible for the higher thresholds at www.sba.gov/size-standards. Significant features of the loan program include:

1.  Businesses must apply for the loan by June 30.

2.  Waiver of affiliation rules for businesses in the accommodation and food service industries, franchises and businesses receiving financial assistance under the Small Business Investment Act.

3.  Non-recourse – SBA has no recourse against any business owner and there are no personal guarantees.

4.  Interest not to exceed 4%.

5.  No debt service payments for at least six months and not more than one year.

 The loan amount cannot exceed $10 million and is the lesser of:

1.  5 multiplied by the trailing twelve month average monthly payroll PLUS the amount outstanding under the SBA’s disaster loan program, or

2.  For businesses not in existence during the period February 15, 2019, through June 30, 2019, 2.5 multiplied by the average monthly payroll for the period January 1 through February 29, 2020, PLUS the amount outstanding under the SBA’s disaster loan program.

Payroll costs include:

1.  Employee compensation that is:

2.  Salary, wage, commission, or similar compensation;

3.  Payment of cash tip or equivalent;

4.  Payment for vacation, parental, family, medical, or sick leave;

5.  Allowance for dismissal or separation;

6.  Payment required for the provisions of group health care benefits, including insurance premiums;

7.  Payment of any retirement benefit; or

8.  Payment of state or local tax assessed on the compensation of employees.

9.  Compensation to a sole proprietor or independent contractor that is a wage, commission, income, net earnings from self-employment, or similar compensation and that is in an amount not more than $100,000 in one year, as prorated for the covered period.

Payroll does NOT include certain federal taxes, compensation of employees not resident in the U.S., individual employee compensation over $100,000 annualized, and sick leave and family leave credited under the Families First Coronavirus Response Act.

Borrowers must certify in good faith that (i) current economic conditions make the loan necessary to support ongoing operations, (ii) funds will be used to retain workers and maintain payroll or make mortgage payments, lease payments and utility payments, (iii) no other pending applications are duplicative of the covered loan request, and (iv) the recipient has not received amounts for the same purpose or duplicative amounts from February 15, 2020, through December 31, 2020.

Amounts expended by the borrower during the eight-week period following loan origination for payroll, interest on mortgages, rent and utilities are eligible for loan forgiveness. Such amounts must be substantiated to the lender. Amounts forgiven by the lender are not taxable to the borrower or business owner. The amount of loan forgiveness will be reduced if the business reduces headcount or salaries and wages. The reduction in loan forgiveness is calculated without regard to employees re-hired or salaries and wages restored by June 30, 2020.

To the extent a loan has a remaining balance after reduction for loan forgiveness, the remaining balance will continue to be guaranteed by SBA and the loan shall have a maximum maturity of 10 years from the date on which the borrower applies for loan forgiveness.

Congruity HR is here to help. Please contact us to discuss how the Paycheck Protection Loan program can benefit your business. While lenders have not yet released application guidelines but are expected to imminently, now is the time to compile payroll records to support your loan request.

Congruity HR will be generating further content as soon as details emerge.

Congruity’s Response to COVID-19 (Mar 26, 2020)

  • March 28, 2020
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To all of our clients,

As you have heard on March 18, 2020 the Families First Coronavirus Response Act was signed into law.

The two main components affecting most employers are: The Family and Medical Leave Expansion Act and the Emergency Paid Sick Leave Act. There is lot of varying information out there so we wanted to reach out to let you know that the definitive guidelines from the IRS on how to actually implement this Act have not yet been released. The IRS has said those guidelines will be provided this week. As of this morning they are still not out. Let’s all remember, it has only been 8 days since this was rushed into law and it takes time to figure out the actual implementation of such a huge ACT. At Congruity we are constantly monitoring the situation and will be getting you the information immediately upon its release.

In addition, the Senate passed the $2 Trillion Emergency Relief Package yesterday with the expected passage in the House tomorrow. The guidelines on how that all will work will have a time lag once it passes given the size and breadth of the Package.

A big part of this package will provide relief for small businesses which will be processed through the Small Business Administration (SBA). Treasury has stated that they are currently revamping the application process into what they hope is a 1 day application to approval process. This should be a tremendous boost for all small business owners who qualify.

Again, we are monitoring these rapid developments and will be sharing the final guidelines as they are released. You will see multiple updates daily.

All of us at Congruity are committed to giving you the most timely and accurate data so that you can realize the full benefits of these Acts and Packages.

Stay safe. We are here for you to help guide you through the process.

Sincerely,
Darrin Hunter
Founder & President, Congruity HR