CPAs urged to be voice of calm in PPP storm

By Jeff Drew

CPAs have a great opportunity to act as a stabilizing force with small business clients as rule changes, deadline pressures, and ongoing processing problems with the Paycheck Protection Program (PPP) fuel a spike in frustration and anxiety levels.

That was one of the messages delivered during an AICPA Town Hall on March 4. A replay of the Town Hall is available on AICPA TV.

Barry Melancon, CPA, CGMA, the AICPA’s president and CEO, told Town Hall attendees that they were likely to see some people “almost throwing their hands up with frustration” due to numerous “inflection points” of anxiety currently in the PPP system. Among those are:

  • A new interim final rule, released March 3, that allows self-employed individuals who file Form 1040, Schedule C, Profit or Loss From Business, to calculate their maximum loan amount using gross income instead of net profit. This change applies to PPP loan applications approved on or after March 3 but is not retroactive for PPP loan applications approved before March 3. That ruling by the U.S. Small Business Administration (SBA) and Treasury has produced resentment and anger among many Schedule C filers already approved for PPP loans, because maximum loan amounts calculated using gross income generally are significantly higher than those that use net profit. The AICPA issued a statement March 5 urging the SBA to make the rule retroactive.
  • Extensive modifications that lenders are having to make in their PPP processing systems to accommodate the calculation changes and new forms required by the interim final rule. “Right now, a lot of lenders are not allowing submissions because the banks have to update systems for the new forms and calculations,” said Erik Asgeirsson, president and CEO of the AICPA’s business and technology subsidiary, CPA.com. Asgeirsson said that many lending platforms, including the CPA Business Funding Portal, which CPA.com operates with fintech company Biz2Credit, would need until the week of March 8 to implement the changes.
  • Continued problems with the SBA’s PPP processing platform, which has refused to accept some applications due to system problems and has stopped thousands of other applications in the system due to validation checks designed to prevent fraudulent applications from being approved. These checks can produce dozens of different error codes, many of which require significant manual labor on the part of lenders and borrowers to rectify so the applications can get moving again.

“It’s sort of hard to believe, a year after the start of COVID, that we could be in such an intense environment,” Melancon said.

Mark Peterson, the AICPA’s executive vice president–Advocacy, said that the ongoing problems with the PPP are exacerbated by the change in presidential administrations. While Secretary Janet Yellen has been at the helm of Treasury for weeks, Congress has yet to hold a final floor vote to approve Isabel Guzman as SBA administrator.

“The circumstances are very challenging,” Peterson said.

What CPAs can do now

Despite the ongoing challenges, the AICPA executives expressed confidence that solutions will be found. For example, the AICPA has heard that some CPAs and small business owners have sent messages urging their congressional representatives to allow Schedule C filers that had PPP loans approved before March 3 to get updated or new loans with maximum amounts determined using gross income instead of net profit.

“There is already political pressure growing because of the SBA’s ruling,” Melancon said.

It will take time for that pressure to boil over into change, however, which is one of the reasons the AICPA called on Congress earlier in the week to extend the March 31 PPP deadline by at least 60 days.

In the meantime, Melancon said, CPAs should consider going through the returns they have on file that include a Schedule C to see if their clients benefit from filing for a PPP loan using gross income instead of net profit. Out of the roughly 25 million sole proprietors in the United States, about 2.6 million have been approved for PPP loans, Asgeirsson said. That leaves a large group of Schedule C filers who might be able to benefit from a PPP loan but don’t know it. “This is a great opportunity,” Melancon said.

CPAs also have the opportunity to act as a trusted adviser to clients, especially those feeling frustrated and anxious due to business difficulties, PPP problems, complexity with other federal aid initiatives (such as the employee retention tax credit and how it interacts with the PPP), and uncertainty with a number of tax issues, including a possible move of the April 15 tax deadline.

IRS Commissioner Charles Rettig has said that the deadline would not be moved except possibly in the case of the IRS having to send out another round of stimulus checks. That scenario looks increasingly likely after the Senate passed an amended version of the American Rescue Plan Act, H.R. 1319, that includes $1,400 recovery tax rebates, most of which would be sent to taxpayers in advance as economic impact payments.

The House of Representatives is expected to approve the Senate version of the bill, perhaps as early as Tuesday. With the current $300 per week federal subsidy for unemployment insurance payments expiring on March 14, Congress is motivated to pass a stimulus plan extending those benefits before that date so recipients won’t miss a check. The American Rescue Plan Act extends the unemployment benefits until early September.

On Thursday, the AICPA called for all 2020 federal income tax, information returns, and payments (e.g., extension and estimated payments) originally due April 15, 2021, to be granted additional time to file and pay until June 15, 2021.

All of the uncertainty has contributed to one of the most stressful periods related to the PPP since the program was originally launched 11 months ago. With many small business clients dealing with rapidly rising levels of anxiety, the accounting profession is in the “eye of the storm,” Melancon said.

“With anxiety, people like to push the panic button, and panic buttons aren’t going to help right now,” he said.

Instead, CPAs acting in a trusted adviser role have an opportunity to be a voice of reason and reassurance that can help clients keep their heads, and their businesses, above water.

“There is a degree of calmness, I think, that the profession can bring to this process,” he said. “What a wonderful value proposition we can bring if we do that.”

AICPA experts discuss the latest on the PPP and other small business aid programs during a virtual town hall held every other week. The webcasts, which provide CPE credit, are free to AICPA members and $39.99 for nonmembers. 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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