You Can Offer Hazard Pay
If your employees are concerned about returning to work because of risks related to the coronavirus, you can offer them a hazard pay bonus or other bonuses. This additional compensation can still be part of your PPP loan that gets forgiven. “It is normal payroll,” Jennings said, adding that she would “be careful” about giving an extremely large bonus. “I think there will be some scrutiny on how big those bonuses are gonna be in the end.”
Understanding The Programs And Eligibility See Details
- Pandemic Unemployment Assistance : Up to 50 weeks of benefits. PUA will be available until week ending March 13, 2021 , with allowance for four additional weeks of benefits for those who have not reached the maximum number of weeks through week ending April 10, 2021.
- Federal Pandemic Unemployment Compensation : Additional $300/week between December 27, 2020 and March 13, 2021. A claimant must be eligible through a separate unemployment program to receive FPUC.
- Pandemic Emergency Unemployment Compensation : Up to 24 weeks of benefits. PEUC is available until week ending March 13, 2021, with allowance of four additional weeks of benefits for those who have not reached the maximum number of weeks through week ending April 10, 2021.
How to File
Will There Be Fallout For Businesses Who Get Ppp Loans Unnecessarily Or For Workers Who File For Unemployment When They Have Other Options
The main thing to remember is the government is providing this emergency assistance and guidance, and is expecting participants to follow in good faith.
Business owners need to show legitimate need in order to qualify for a PPP loan, and in order to have those funds forgiven, they must provide documentation that they used the funding in accordance with the treasury departments directives.
Were already seeing the fallout for some very successful businesses that accepted large PPP loans and are bowing to social pressure and returning the funding.
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How Do Ppp And Unemployment Benefits Overlap
These two programs are not compatible with each other. While you can apply for both programs, you cannot collect funds from both programs at the same time.
If you are approved for both programs however, your PPP funds would be considered âincomeâ and you would need to report that income to the state employment insurance department. If you do not report your PPP funds to the state, you could be liable for EI fraud. Once you do report your PPP loan as income, your unemployment benefits may stop. Your state may ask you to repay some or all the unemployment funds for the period where you were receiving both. You can find your state unemployment resource to notify them that you will be receiving income through the PPP on the Department of Laborâs Services By Location portal.
After your PPP coverage ends, you can resume collecting unemployment benefits, if you still require it.
Further reading:
Ppp Forgiveness: What To Do If You Got A Paycheck Protection Program Loan & Your Employees Wont Come Back
- Shannon VissersThe former editor-in-chief of SteelOrbis, Shannon has been researching and writing about small business software and financing since 2015. Her shopping and retail expertise has been cited in numerous publications, including Reader’s Digest, MSN, Yahoo Finance, and GOBankingRates . She has also published articles for LIVESTRONG.COM, eHow, Life’d, and other websites. Shannon attended San Diego State University, graduating in 2005 with a BA in English.
Expert Analyst & Reviewer
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Can Ppp Loans Affect Unemployment Insurance Benefits
This article was published on May 19, 2020. New information may be available regarding PPP loans and UI benefit packages. Visit the Small Business Administration for more information. For more information about the First Draw and Second Draw of PPP loans, visit this article.
The PPP loan is a valuable resource for many business owners, especially for employers who have employees with unemployment insurance. With the new loan, employers will have the ability to pay their employees as they would normally and can avoid paying unemployment taxes. This all sounds great, but PPP loans are confusing to employees, and many wonder whether their employers PPP loan will alter their unemployment insurance statuses. Do PPP loans affect employees unemployment benefits? Lets find out.
Im A Sole Proprietor Independent Contractor Or Freelancer Am I Eligible For Unemployment Benefits
Yes, but it’s complicated. The PUA portion of the CARES Act provides benefits to workers not typically eligible for unemployment benefits, primarily, sole proprietors , independent contractors , and freelancers, who were laid off or lost work as a direct result of COVID-19.
The Illinois Department of Employment Security is mandating that all SPs, IPs and freelancers apply for benfits using the existing application that is intended for W-2 employees. According to IDES, workers must receive a denial for regular unemployment benefits in order to be eligible for PUA benefits.
The Bottom Line is This: If you are an SP, IP, or freelancer, and your work has been reduced or eliminated because of the Coronavirus pandemic, you should apply for unemployment benefits through the existing IDES application for employees. The IDES will review your application, and if they decide that you should have been categorized as an “employee,” they will grant your application under the existing law. If they decide that you are not a covered employee, they will deny your application, and that denial will allow you to apply for PUA benefits through the new portal.
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What If My Employees Would Rather Take Unemployment Benefits Than Remain Employed With My Business After A Ppp Loan How Do I Get My Loan Forgiven
If your employees elect to stay unemployed rather than remain on your payroll, this can create a sticky situation for you.
Under the terms of the PPP loan, 60% of the money must be spent on payroll during the covered period , and the remainder spent on approved expenses like business rent, mortgage interest, and utilities, in order to have your loan fully forgiven.
This makes many business owners fear they will be unable to get their loans forgiven if their employees quit or refuse to have their jobs reinstated upon receipt of a PPP loan. However, this doesnt appear to be the case.
Under the terms of the PPP loan, you just need to demonstrate that you maintained the levels of employment and compensation as of the time you receive your loan funds, not necessarily that you keep the same employees.
Therefore, you can restore your former headcount and payroll, or rehire within the parameters of the PPP requirements, or hire new employees, or simply maintain the levels of staff and compensation as of the time you receive your PPP funds, and still have your loan forgiven.
You are not required to bring back employees who are on unemployment. You can use your PPP funds to either hire back previous employees, hire new employees, or maintain existing staffing levels.
Some additional points about loan forgiveness: Your loan forgiveness will be reduced if you decrease salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019.
Will You Still Have Any Work To Do
For some sole proprietors, business may be down but not completely gone. If you still have some work coming in and you have the ability to earn some income over the next few months, getting the PPP would be a better option. The amount you receive from the PPP wonât be impacted by working and earning incomeâyouâll still be able to receive 2.5 times your monthly payroll cost.
But if you are receiving unemployment benefits and are still partially working, your benefits may be reduced. Check the rules with your state agency to see how much your unemployment check would be reduced if you continue to do some work.
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Under The Governors Phased Reopening My Business Is Eligible To Resume Operations But I Do Not Feel That It Is Safe Yet To Do So Will I Lose Ppp Loan Forgiveness Eligibility If I Choose Not To Reopen
PPP loan forgiveness eligibility does not depend on when you reopen. Instead, the amount of loan forgiveness depends, in part, on the total amount of loan proceeds spent on certain eligible uses during an 24-week period . The first day of that 24-week period is the date on which you first received your PPP loan proceeds.
For example, if you received your PPP loan proceeds on Monday, July 6, 2020, then that would be the first day of your 24-week period. The last day would be Sunday, December 20, 2020. Therefore, you would still be eligible for loan forgiveness for amounts paid for certain eligible uses between July 6 and December 20, even in the unlikely event you remained closed until a later date.
There is one exception to the 24-week periods start date. If you have a biweekly or more frequent payroll schedule, you have the option to choose an alternative start date. The alternative start date is the first day of your first pay period following the date on which you received your PPP loan proceeds. But that alternative start date for the 24-week period applies only to certain payroll costs. The 24-week period for non-payroll costs that are eligible for loan forgiveness still begins on the first date on which you received your PPP loan proceeds.
For more details on the requirements for loan forgiveness, see the SBAs loan forgiveness application and instructions.
What Happens If You Dont Pay Back Unemployment
For starters, the money could be withheld from your paycheck and any tax refunds due to you or your spouse until the amount is repaid in full. It could also be recovered from any lottery winnings you might get.
The money could also be deducted from future unemployment benefits that you may be entitled to. Finally, the state could bring a lawsuit against you.
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How The Loan Works
Getting approved for a loan is just the first step that loan has to be funded before your employer can make any moves.
That process shouldn’t take too long, however, as SBA regulations state that PPP loans must be funded within 10 days. From the date of origination of the loan, your employer has eight weeks to spend the funds if they want the loan to be forgiven by the federal government, and 75% of the loan amount must be spent on payroll a.k.a., paying you, the employee.
What If I Am Turned Down For Pandemic Unemployment Assistance
When you file an initial claim, your state unemployment agency is required to promptly determine if you are eligible, and if so, the weekly and maximum amounts of PUA payable. If you are denied PUA, you must be issued a determination you can appeal. You have the right of appeal and opportunity for a fair hearing to claims for PUA.11 Consult an experienced employment attorney if you have additional questions about PUA appeals.
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How Do The Ppp And Eidl Overlap
You can apply for and use the PPP and EIDL loans at the same timeâyou just canât use them for the same purpose.
If you received the EIDL between January 31 and April 3, 2020, you were able to refinance the EIDL loan into the PPP loan. This option worked best for those who were planning on using the EIDL funds for payroll, because the refinancing meant that the loan could be forgiven.
Most businesses will not have had the option of refinancing the EIDL into the PPP. In this case, the two loans will remain separate, however you cannot use the loans to cover the same expenses when you have both of them. For example, if you still have PPP funds remaining, you cannot use the EIDL for payroll. But once youâve used up your PPP funds, using the EIDL for payroll will be permissible. For example, if you used PPP funds for June payroll, youâll have to use EIDL funds for a different payroll period or for other approved working capital uses.
What If I Have A Job And Also Get Self Employment Income
Employers pay into unemployment insurance and so generally regular unemployment benefits are available to those with a job where they receive wages reported on Form W-2. According to the DOL, in processing claims for PUA, states must verify that individuals have no regular Unemployment Insurance entitlement. If the individual is not eligible for regular UI because there are insufficient covered wages or the individual has an active UI claim with a definite or indefinite disqualification, then a state does not need to require the individual to file a regular UI initial claim.9 Check with your state unemployment agency to find out which options are available to you.
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Okay But Why Can’t I Then Apply For Pua Benefits Based On My 1099 Income
The PUA provides benefits to workers not eligible for standard W-2 unemployment benefits. On the first page, the PUA application asks whether you’ve applied for and been denied standard W-2 unemployment benefits. If you were not denied benefits entirely , you would have to answer “No” to that question, and your application will automatically be denied.
Quarterly Filing And Responding To Requests For Information
We need your tax reportsfiled early or on timemore than ever before. An unprecedented number of Washingtonians are applying for unemployment and your reports are crucial to finding out if they can establish a claim. Quarterly tax reports are due on April 30, July 31, Oct. 31, and Jan. 31 each year.
We know you’re experiencing this crisis too. We are offering more leniency to employers who can’t file on time because of COVID-19. You will need to request a penalty waiver in writing.
What if I am late in filing tax reports, paying taxes, or responding on time to requests for information because of COVID-19?
Late reports and responses impact benefit claims. At the same time, we know COVID-19 has disrupted operations for many businesses.
- We may now waive penalties for responses that are late because of COVID-19.
- Please do everything you can to provide information on time.
- You will need to request a penalty waiver in writing.
If I paid an employee using money from a Paycheck Protection Program loan, are those payments reportable?
Yes. PPP payroll payments for individuals employed on a full-time, part-time or other basis are reportable.
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You Can Hire New Workers
Some business owners whose workers are now receiving unemployment benefits are finding it hard to rehire them after receiving a PPP loan. If your former employees aren’t able to return to work for any reason, you can hire new workers without jeopardizing the portion of your PPP loan that will be forgivable. “The statute doesn’t care if it’s Sally or Joe,” Jennings said. She added that business owners should focus on the payroll funding they need for the full-time equivalent that makes sense for their business right now.
Malone Should Report His Ppp Income To His States Labor Office
Our reasoning: The owner compensation replacement is considered to be income. Income needs to be reported to the labor office when you are claiming unemployment benefits.
Maloneâs income will be covered for the PPPâs eight-week period. Ideally, he should have applied for unemployment after the PPP funds ran out. But since heâs already in the system, he should report the income in his weekly filing, to avoid EI fraud. The employment office will reassess his eligible amount appropriately.
After the eight weeks, Malone can continue collecting unemployment benefits.
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Can A Former Employer Contest Your Unemployment Claim
If youre concerned about a former employer, at least the last organization you worked for will be notified if you file a claim because, in most states, unemployment benefits are funded by employers. Your former employer can contest your claim if they dont believe youre eligible to collect unemployment.
Where It All Started
As a result of the coronavirus emergency in the United States, the Trump administration signed the Coronavirus Aid, Relief, and Economic Security Act on March 27th, 2020. The Act provides emergency and health assistance to those affected by the coronavirus impacts. Although the CARES Act was incredibly useful to people around the nation, businesses were still suffering. With consumerism at an all-time low, many business owners struggled to stay above the water as profits declined. With the realization that small business owners needed assistance, the U.S. Small Business Administration created the Paycheck Protection Program loan.
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Important Ppp Update For 2021
On December 22, 2020, Congress passed a bill renewing funding under the CARES Act, including an additional $284 billion earmarked for Americas struggling small businesses. The rules and application process for PPP loans and forgiveness have been modified, with more businesses eligible for PPP loans, more expenses forgivable, and a simplified application process.
- Important updates for 2021 PPP loan forgiveness
- What your employees need to be aware of if you get PPP funding
- Unemployment benefit have changed due to COVID-19
- How to maintain PPP loan forgiveness if you lose employees
With the crush of millions of businesses scrambling to get Paycheck Protection Program loans, many business owners may assume that their employees would prefer to receive their normal paychecks, or a portion thereof, rather than file for unemployment.
However, this is not always the case. Lets go over some circumstances in which your employees may prefer to file for unemployment rather than their current paychecks, and what you can do to maintain your PPP loan forgiveness if you do lose some employees.
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