PPP advice for firms: Preach patience to clients

By Jeff Drew

Carl Peterson, CPA, CGMA, has a recommendation for accounting firms facing a torrent of client demands and deadlines caused by the confluence of tax season and the reopening of the Paycheck Protection Program (PPP).

Take the time to do it right.

Peterson, the AICPA’s vice president–Small Firm Interests, offered those words of wisdom during a PPP Town Hall on Jan. 28 that discussed the challenges confronting accounting firms of all sizes, but especially smaller ones.

Clients, particularly those in need of a cash infusion as the COVID-19 pandemic continues to slow the economy, are pressing their accounting firms for help in applying for assistance from the PPP, which reopened Jan. 11. Complicating that process are several factors, including:

  • Up to 30% of applications for PPP second-draw loans, which are reserved for previous PPP borrowers that meet revenue-reduction and size requirements, are being held up in the U.S. Small Business Administration’s PPP portal for a variety of reasons, most prominent among them technical glitches and anomalies that must be rectified.
  • The SBA and Treasury have released several guidance documents for the PPP relaunch that have laid out new features for the second iteration of the PPP and also detailed differences between the new PPP and the program’s first iteration, which closed in August. Firms have had to devote time and resources to understand those changes and explain them to clients.
  • Many businesses also need advice on how to claim an employee retention credit (ERC) in a manner that will not reduce the benefit they receive from the PPP. To maximize the two benefits for clients, firms must balance the need for careful timing with the client’s need for immediate cash. Adding to the challenge is that much-needed IRS guidance is not yet available.

On top of all that, many CPAs have spent the past 10 months assisting their clients through the economic crisis and an extended tax filing season. As the next busy season approaches, they may not have had much down time.  

“I think the best thing for firms to do right now is just to breathe, be intentional, create and follow processes, and manage client expectations,” Peterson said during the Town Hall. “Be patient, slow down, do it right, and do what’s best for your client.”

‘Overcommunicate’ with clients

Key to that process is what another Town Hall participant, Trusted CFO Solutions President and Co-founder Dixie McCurley, called “overcommunicating” with clients. Her firm has started sending out communications to clients twice daily, at 10 a.m. and 4 p.m., even if nothing has changed with PPP guidance or procedures.

Another area where communication is crucial is in addressing client fears about PPP funds running out before their application is filed. Many clients, mindful that the initial $350 billion provided for the first round of the PPP was exhausted in less than two weeks, are pushing their CPAs for quick action on second-draw PPP applications.

This time, however, indications are that there will be sufficient PPP funding for the current application window, which is scheduled to close March 31. That was the assessment offered during the Town Hall by host Erik Asgeirsson, president and CEO of AICPA subsidiary CPA.com, and by Daniel Martini, vice president, Congressional Relations & Political Affairs, for the American Bankers Association.

Asgeirsson and Martini both referenced an SBA report showing that the agency approved $35 billion in loans for the first two weeks of the program. At that burn rate of $2.5 billion per day, the program would not exhaust the $284 billion available for forgivable loans, though it should be noted that the first week of the program was reserved for the smaller lenders, with the biggest banks not eligible to submit applications until Jan. 19.

Juggling ERC and PPP

One of the issues that has prompted the most questions during recent AICPA Town Halls is the analysis needed to help clients gain the maximum benefit from both the ERC and the PPP in 2021. Because eligibility and benefits of each program are different, a client-by-client analysis is needed. One approach some firms are discussing with clients is to hold off on applying for PPP funding initially so that employers can maximize their ERC for the first and second quarters of 2021, with PPP funds being used after ERC wage caps are met. However, some clients may not be eligible for the ERC in 2021. And many clients simply may not want to wait for PPP assistance.

“A lot of our businesses are struggling, and they really need the funds,” McCurley said. “Having to wait has been the hardest thing.”

In those cases, Peterson said, firms can use their expertise to help clients strike the balance between the immediate need for PPP funds and choosing a course of action that maximizes the ERC they can claim for 2021.

Self-assessment of need

Another area of client concern is the requirement on the application for second-draw PPP loans that borrowers certify that they need the money because they face economic insecurity.

“Accounting firms ask about the self-assessment of need all the time,” said Peterson, who has spoken with more than 100 accounting firms the past two weeks. Often, the firm has a client that has a quarter in 2020, usually the second quarter, that meets the requirement for a second-draw loan. That one quarter had at least a 25% drop in gross receipts between 2019 and 2020, but business bounced back after that and the client ended the year in good position.

Despite that, the client is uncertain about its 2021 prospects. The reasons can vary, but Peterson notes that many areas are still under some kind of lockdown. There are also questions about a potential state tax liability from a PPP loan. Regardless of the reason for the economic uncertainty, Peterson advises firms to follow advice that the AICPA has been giving firms since the first PPP launched last year.

“It all comes back to making sure your client has good documentation of their concerns about their economic future,” he said. “Then the client has to decide whether or not they can sign off on the application certifying that position of uncertainty.”

Need a little patience

In the end, Peterson said, firms should consider moves that will ease the pressures on partners and staff already burned out by a busy season that started last January and never really ended. One option could be to extend tax returns so the firm can then focus on more immediate issues such as the PPP and the ERC.

“If I were in practice today, I would talk to all of my business clients saying, ‘Let’s analyze and focus on ERC and PPP to make sure that we maximize the two opportunities,’” Peterson said. “‘But to be able to give that the attention that it really needs, to do the right thing, we’re going to have to extend your tax returns and deal with them later, after tax season.’ That will take off some of the pressure you and your firm staff are under right now, to do it all when there is really not enough time in the day to get it all done.”

Delaying filing forgiveness applications for PPP borrowers may be another approach to managing client expectations. The demands of restarting the PPP have slowed down lender and SBA processing of loan forgiveness applications for PPP loans made during the first iteration of the program last year. Because borrowers have until 10 months after the end of their covered period to begin making payments, some borrowers who aren’t approaching that time frame may be willing to hold off on filing their forgiveness applications. That provides additional time for CPAs to assist clients in analyzing the interplay between the PPP and the ERC for 2020 wages.

To hear more practice management tips, along with a look at the current PPP loan processing environment and frequent PPP questions, review the Jan. 28 AICPA Town Hall, which is available on demand at AICPA TV.

AICPA experts discuss the latest on the PPP and other small business aid programs during a virtual town hall held most weeks on Thursday at 3 p.m. ET. The webcasts, which provide CPE credit, are free to AICPA members. Go to the AICPA Town Hall Series webpage for more information and to register.

The AICPA’s Paycheck Protection Program Resources page houses resources and tools produced by the AICPA to help address the economic impact of the coronavirus.

Accounting firms can prepare and process applications for the PPP on the CPA Business Funding Portal, created by the AICPA, CPA.com, and fintech partner Biz2Credit.

For more news and reporting on the coronavirus and how CPAs can handle challenges related to the outbreak, visit the JofA’s coronavirus resources page or subscribe to our email alerts for breaking PPP news.

— Jeff Drew (Jeff.Drew@aicpa-cima.com) is a JofA senior editor.

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