September 4, 2020: Are You Accidentally Committing PPP Fraud?

Gusto Editors

September 4, 2020

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The payroll tax deferral is in effect. Here’s what you should know

Last week, we were sure President Trump’s proposed payroll tax deferral couldn’t possibly go into effect on September 1—but thanks to guidance issued by the IRS late last week, we were proved wrong.

But our concerns remain. One of the roadblocks in getting this deferral off the ground was the question of whether the taxes would be waived, which would require Congressional approval—or who would ultimately be responsible for paying them if not. The guidance now clarifies that employers are responsible for paying back the deferred taxes next year.

So if you offer the deferral option, your employees’ Social Security tax payments for the rest of this year can be deferred until April 30, 2021—which can be great for your team. It’s free money with no strings attached–-for them, anyway. But make sure you understand your obligations:

  • Employers have to opt in to offer the deferral.
  • Be prepared to pay these taxes back in 2021.
  • Employee Social Security tax withholding and payment must resume in the new year.

Check out our article on the deferral program for our full recommendation.

Are you accidentally committing PPP fraud?

Let’s be real, the Paycheck Protection Program (PPP) is complicated. Even when you’re trying to follow its dozens of rules, you can break them—especially when you’re trying to bend them. Recent investigations into PPP fraud are showing that was the case for several businesses: 

Several workers told The New York Times that their employers had asked them to repay a portion of their earnings or work for free in the future. That wasn’t allowed under the program’s rules.

Under the initial rules, borrowers who wanted the loans forgiven had to spend most of the money within eight weeks. Those limits frustrated many owners, and some appear to have tried to quietly break the rules, according to the workers, who asked not to be identified to protect their livelihoods.

The parameters of the program meant PPP loans didn’t always help business owners keep their doors open, so some tried to use the funds as an “advance” for future work, or asked their employees to pay back funds if they didn’t end up working. This, of course, is not what the program intended.

While the PPP Flexibility Act has addressed some of the issues that had business owners looking for workarounds, misuse of your PPP loan can still result in consequences for your business. The bottom line is, know the rules—and it’s best to exercise caution with the grey areas of the program. We cover four ways you can reduce your risk of committing PPP loan fraud on our blog.

Headlines from the week

  • The Pandemic Is Motivating 96% of New Entrepreneurs in 2020 (Small Business Trends) — According to a study from Azlo, a banking platform for entrepreneurs, 96% of new entrepreneurs say the pandemic is giving them the motivation they needed to start their own business. Half of those surveyed said they had more time to get their venture going while other activities were put on hold, and 40% of respondents said the pandemic is what prompted them to start their business.
  • ‘That Kept Us Going’: Small Businesses Stay Alive With Local Help (New York Times) — Even as their revenue struggles, local governments are keeping small businesses afloat through relief funds and grants. City councils, mayors and governors have come to the aid of small companies while federal relief remains at a standstill.

Top relief options for the week

  • Tennessee Business Relief Program will provide relief payment between $2,500 and $30,000 in no-cost funds from the state to more than 40,000 small business owners across 60 different industries. Eligible businesses have until September 25 to confirm their information with the Department of Revenue.
  • Collin CARES Small Business Grants offer up to $25,000 for eligible businesses in Collin County, Texas, that experienced a gross revenue loss of greater than 15% due to COVID-19. These grants are taxable.
  • City of Kirkland, Washington is providing $750,000 for up to 150 one-time small business grants of $5,000 each. Applications are due on September 16.
  • Bethlehem Industrial Development Agency is providing grants of up to $500 to reimburse PPE and other costs incurred to prevent the spread of the disease as businesses reopen. Grants will be awarded until the $25,000 fund is expended or the program ends on December 31.
  • See more relief options in our Small Business Relief Finder.

Want more small business news and resources? Check out past editions in our archive.

Gusto Editors Gusto Editors, contributing authors on Gusto, provide actionable tips and expert advice on HR and payroll for successful business management.
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