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Four Million Loans
August 1, 2024
Within weeks of the government announcing the PPP loans, millions of these loans were processed with hundreds of billions of dollars consequently being distributed across the US.
Whilst said loans served their purpose in propping up the US economy, they were issued without any clear guidance on some integral elements of their function. It was not clear who was eligible, what would be forgiven or how to calculate the amount that a business was able to apply for. There was, in fairness, an attempt by the SBA to provide answers to some of the most frequently asked questions. However, as evidenced by FAQ 31, these answers only served to provide even more questions (see the next blog post for more detail on this). This was a self-perpetuating cycle, answers continually changed providing an ever increasing workload to the already overloaded lives of accountants. It is our job as accountants to record everything and yet, how could we when the things we were supposed to keep track of were evolving before we could even record the last set of information.
At first, the PPP loans came with an eight week caveat. This is to say that the money had to be spent within eight weeks. However, this changed to become the twenty-four week rule.
There were also questions about employee retention. It is natural for employees to come and go in the course of business. There was no clear guidance provided as to what an employer should do if one or more of their employees moved on after they had applied for a loan.
Additionally, there was no clear guidance as to who one would have to talk to in order to have loans forgiven and what this process would even look like. It was also totally unclear as to when these loans would be forgiven.
Finally, the AICPA decided to draft up some forms in order to document every necessary element of the PPP loans and send these over to the SBA. Whilst this was enormously helpful, it did not stop the clients from calling our phones every day. It did, however, provide us with a neat list of the questions that we could expect from them. For an example of a not-so-neat list, read the following blog for discussion of the ill-fated FAQ sheet released by the SBA.
One of the biggest questions pertaining to the PPP loans was, ‘If forgiven, will these loans be counted as income?’
You're not the only one confused about what this means...
"The scheme of PPP Loans."
Changes to the lives of accountants were not just limited to having to work from home and reconsider our use of office space.
It was not only the working environment of organizations such as the IRS that experienced severe disruption in the midst of the pandemic.
Why the tax profession needs help.
During COVID, there was an unprecedented boom in unemployment. Millions were laid off in California alone, leaving our state’s severely understaffed unemployment offices totally overrun. They did not have the facilities, nor the means in many cases, to answer the panicked questions that were pouring in by the boatload. This left many confused, newly unemployed people taking the next logical step (at least in their minds) to getting answers. As we exist and work in the financial world and these issues were monetary, millions turned to their accountants seeking guidance. However, accountants are not trained in the field of unemployment assistance and thus do not know how to file unemployment claims. Therefore, we were faced with another tidal wave of questions for which we had no answers. And yet, it did not end there. Our clients sought to provide help to their friends who would usually file their own taxes. As they could no longer get through to the IRS, clients of ours offered to forward any questions to us their accountants. The same occurred in situations where children had been unable to get in contact with their own accountants and so their parents brought another set of questions to us. Much like the California unemployment offices, we were continually inundated with sets of questions that we really did not have the time nor the resources to provide answers to. Furthermore, these questions were not only external, as the tax season had been extended to July 15, accountants within our own firm and others began to present their bosses with inquiries relating to the hard earned vacation that they would usually take at the end of April. Rightfully so, this vacation period is eagerly anticipated every year and now it was becoming clear that it would not proceed as usual. Employees wanted to know if they should bother making plans, whether their bosses would grant them time off and if it would even be possible to travel. The questions did not stop and yet, there was so much more to come.
For those involved in tax preparation, COVID managed to send society into a global shutdown at the most inconvenient time possible (not to say that there is a convenient time for a global shutdown), a month prior to tax day. Therefore, one could be forgiven for imagining that an extended tax filing deadline would have helped to alleviate some of the pressure placed on accountants and tax preparers. However the decision by the federal government to extend the tax filing deadline to July 15 also extended the deadline to pay any taxes owed to that date. Therefore, while many people felt a sense of relief around this extension, as it gave them a little extra time to get their affairs in order, for those of us tasked with preparing said taxes it provided an extended, three month headache. We were faced with another set of questions and an accompanying bombardment of phone calls. The yearly filing date was extended, but what about F-Bars (foreign taxes)? What about quarterly tax estimates that are normally due in June? Will those be extended as well? However, we were faced with an even more pressing question. Because federal tax deadlines were extended, did this mean that state tax deadlines were also to be extended? This was another seemingly unanswerable question as most state tax offices did not know themselves, nor were they in the office to answer our calls. Eighty hour work weeks seemed a pleasant, distant memory as I began undertaking hundred hour weeks to deal with all the added demands that kept piling up. In summary, our profession was hit with a ton of bricks. We continued to be provided with new pieces of tax altering legislation which each individually required hours of work to understand their intent and effect. At the best of times, a new piece of legislation would require roughly twenty-five extra hours of work. Over the course of a few days, we were hit with over a hundred new laws that affected taxes, tax filing and more. All of which needed immediate answers for our affected clients.
Amidst the chaos that was COVID, just like all other offices and sectors across the US, the Internal Revenue Service (IRS) was forced to close their doors and send employees to work from home. At this time, they cited that they would return to an in-person system of work when it was safe to do so. Consequently, the organization had to make significant changes to every aspect of their operations. This was especially awkward and burdensome for us as accountants due to the fact that it fell right in the middle of tax filing season. All of the IRS submission processing centers were forced to close and as such the organization stopped taking paper tax returns. And so, who did those millions throughout the US who did not know where to send their returns call … Their Accountants! The IRS closed down their taxpayer assistance lines leaving citizens unable to call the IRS and ask questions about their taxes. And so, who did these millions with questions call … Their Accountants! During this time period, the IRS accrued in excess of sixteen-million paper tax returns which needed to be filed. Conversely, their in-person workforce dropped from eighty-one thousand to a measly three thousand. This number would go on to drop as low as one thousand employees who were working full weeks in the office. Whilst the remaining eighty thousand employees were still working, this was from home, without the necessary resources, all whilst home-schooling their children (something that most everyone is unqualified to do). The chaos and confusion that ensued had to go somewhere and the next logical place for clients to try and get answers was (you guessed it) from their accountants. During this time, my clients were calling me so fast that I could barely hang-up my phone before it would ring again. This was an image that was mirrored across the accountancy profession.
The $2.3 trillion stimulus bill known as the Coronavirus Aid Relief, and Economic Security Act, or CARES Act was signed into law on March 27, 2020 cited with the aim of reducing the economic damage caused by COVID. At over $2 trillion, the CARES Act stands as the largest financial rescue package in US history. However, due to the emergency nature within which the bill was drafted it is significantly shorter than most, taking up only 335 pages. For individuals, the bill provided relief in the forms of direct payments and unemployment assistance. For small businesses there was the Paycheck Protection Program and emergency loans. Larger businesses were provided with economic stabilization loans and employee retention credit. Furthermore, tax breaks and credits were also provided to individuals who were suffering financially. Undoubtedly, the CARES Act did some great things and played a pivotal role in propping up the US economy during the COVID years. One such an effective measure included within the Act was the increase in unemployment benefit by $600 weekly. Given the increase in those unemployed, temporarily and permanently, this was no doubt a relief for many Americans nationally. Under the Act , the eligible pool of candidates for unemployment was further expanded with the new measures introduced pertaining to sole proprietors and partners in partnerships. Prior to the pandemic, such individuals could not claim unemployment as they are not employees and thus had not paid into the insurance pool. Furthermore, those who had a new job lined up that they were unable to begin also joined the group of those eligible to claim unemployment. The California Employment Development Department, with whom we work most often, faced in excess of a million people applying for unemployment in March alone. However, such significant changes to the legislative environment surrounding such issues started in motion a tidal wave of mass uncertainty across the nation. And now for the fun part, who was left to deal with the tsunami of confusion and questions that subsequently ensued … Accountants!
