Non-Tax PPP Tracking Question

[dascpa]

Clients receiving the PPP funds.  At some point they will have to "prove" the proper usage of the funds.  Easiest way is to open up a separate bank account but with banks being closed and payroll service providers needing time to set up new direct deposits this is not always practical.  

In your opinion what is the best way for clients to track and "prove" down the road the funds were used for payroll, rent and utilities when the funds are being commingled with general funds?

[RollTide68]

You know how much the deposit was for correct?

Set up a separate PPP ledger with that amount and start deducting only "forgivable" expenses from that PPP ledger.  Only deduct PPP expenses from the ledger until it is depleted.  Once you hit zero in the ledger balance copy all receipts and substantiating documents and attache to the ledger.

Make sure at least 75% is payroll expense.

[IRonMaN]

One of our local banks is setting up a new bank account for the funds.  As the cash is needed, the clients can draw down from that account which doesn't sound like a bad idea.  In any case, it's going to be interesting to see how well these things get policed later on.  Getting the cash was easy, who knows how many times the rules will change by the time they have to actually account for the cash.

[dascpa]

That's the easy way to track it in accounting software.  But that's not proving the monies were used strictly for it.  We all can manipulate journal entries to make it look that way but say for example I get in $50,000 today. And later today I pay off my inventory vendors, my business loans, etc.  Next week I get in more revenue and then pay my payroll.  I actually used the funds for the wrong purpose but I posted in my books only the things that make it appear correct.  I'm really asking if anyone knows the actual SBA rules on this.  I have not seen a thing.

[IRonMaN]

"I'm really asking if anyone knows the actual SBA rules on this."

The rules change about twice a week, so nobody has the "final" rules yet. 

[dascpa]

We know there are no formal "rules" yet and "opinions" on all of this change daily or hourly.  I would like to give a good educated answer to my clients rather than "my best guess".  I was hoping someone out there was a lot smarter than me.  I guess if they were they wouldn't be working hundreds of hours per week preparing tax returns and answering questions on this board......

[IRonMaN]

All you can do is tell the clients to leave the best footprints that they can.

[TaxGuyBill]

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@dascpa wrote:

That's the easy way to track it in accounting software.  But that's not proving the monies were used strictly for it.  We all can manipulate journal entries to make it look that way but say for example I get in $50,000 today. And later today I pay off my inventory vendors, my business loans, etc.  Next week I get in more revenue and then pay my payroll.  I actually used the funds for the wrong purpose but I posted in my books only the things that make it appear correct.  I'm really asking if anyone knows the actual SBA rules on this.  I have not seen a thing.

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The law doesn't say that specific money needs to be used for qualifying expenses.  It says the loan can be forgiven if you paid qualifying expenses during the covered period.

[sjrcpa]

Money is fungible.

[IRonMaN]

Must be why you need to wash your hands after touching it.