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Getting Your PPP Loan Forgiven

Congratulations, you received a Paycheck Protection Program (PPP) loan!  If you are like most businesses, you applied for the loan because it can be forgivable.  But approval and funding are only half the story, until you apply for loan forgiveness, you owe this money back.

You need to spend at least 60% of the money received on payroll costs.  Up to 40% can be spent on non-payroll costs that include: rent, utilities, mortgage interest, interest on equipment/other debt, telephone, internet and others.  The covered period for these expenses starts on the day you received the loan and automatically lasts:

• 24 weeks (but no later than 12/31/20) for borrowers who received funds after 6/5/20, or

• Was eight weeks for loans received prior to 6/5/20.  At press time that extension has be granted to 24 weeks for all borrowers who wish to take it.

Let’s take a closer look at the definition of payroll costs.   There are three buckets.  For an owner/employee of a corporation/partnership this is 2019 salary including healthcare costs and retirement.   For Schedule C/independent contractors this is your 2019 net profit (excluding healthcare costs and retirement).  For non-owner employees the payroll cost is actual 2020 wages including all benefits.

There are certain safe harbor rules regarding non-owner employee payroll costs that must be met by 12/31/20.    For salaried employees making under $100,000 including benefits, the payroll costs cannot be reduced by more than 25% from the pre-Covid level (as of 2/15/20).  If the salary is not brought back to the acceptable range, there is a reduction in the loan forgiveness amount.

Similar reductions apply for hourly employees based on full time equivalent (FTE) hours.  These calculations are done employee by employee.   An Excel spreadsheet detailing these calculations will be required with the application.

The documentation required with the application for loan forgiveness includes the following (other documents may be required depending on your circumstance):

1. Payroll costs – third party payroll reports, bank statements showing deductions and payroll tax filings.  Alternatively, Schedule C filers/independent contractors must submit 2019 tax returns.

2. FTE calculations for hourly employees

3. Non-payroll costs – Invoices/documentation that expense existed prior to 2/15/20 and invoices/documentation during the covered period.

Any portion of the loan that is not forgiven will convert to a two to five year loan with the Small Business Administration (SBA) at 1% with no penalty for prepayment.

FYI, SBA will be automatically auditing all loans over $2,000,000.  Loan necessity is being reviewed to see if other means of raising funds were available.

As of today, there are undefined terms and open items with the SBA including the treatment of one-time bonuses to employees.

Contact Robert J. Raimondo, CPA CMA of RFT Partners LLC for information and assistance in filling out detailed applications for loan forgiveness.   He can be contacted at 

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