Q: What documentation do I need to provide to corroborate that my entity sustained at least a 25 percent reduction in gross receipts?
A: The following are the primary sets of documentation applicants can provide to substantiate their certification of a 25 percent gross receipts reduction (only one set is required):
- Quarterly financial statements for the entity – If the financial statements are not audited, the applicant must sign and date the first page of the financial statement and initial all other pages, attesting to their accuracy. If the financial statements do not specifically identify the line item(s) that constitute gross receipts, the applicant must annotate which line item(s) constitute gross receipts.
- Quarterly or monthly bank statements for the entity showing deposits from the relevant quarters – The applicant must annotate, if it is not clear, which deposits listed on the bank statement constitute gross receipts (e.g., payments for purchases of goods and services) and which do not (e.g., capital infusions).
- Annual IRS income tax filings of the entity (required if using an annual reference period) – If the entity has not yet filed a tax return for 2020, the applicant must fill out the return forms, compute the relevant gross receipts value, and sign and date the return, attesting that the values that enter into the gross receipts computation are the same values that will be filed on the entity’s tax return.
Other Important Points
- PPP loans, EIDL loans, and EIDL advances are not includable in gross receipts for purposes of calculating reduction in gross receipts.
If 2020 amounts are used for calculating average monthly payroll and the borrower has not yet completed a 2020 return, SBA states the borrower must “fill it out and compute the value.” This is applicable to Schedule C, Schedule F, and Partnership borrowers.
The link below provides additional details regarding calculating maximum loan amounts for second draw loans:
Second Draw Paycheck Protection Program (PPP) Loans: How to Calculate Revenue Reduction and Maximum Loan Amounts Including What Documentation to Provide
If you have specific questions related to your business or PPP loan, please reach out to us. We would be happy to answer your questions and work with you on a strategy specific to your current business circumstances. These are unprecedented times. Santora CPA Group’s professionals are here Right, By Your Side.