Paycheck Protection Program Loan Forgiveness Application - Frequently Asked Questions
On June 5, the President signed the Paycheck Protection Program Flexibility Act. The Act changed several provisions of existing legislation and guidance relative to the Paycheck Protection Program and the CARES Act. We are working on updating the below FAQs to reflect the most recent guidance. Please reach out to your Brown Smith Wallace advisor with any questions.
Read below for some frequently asked questions we've received during our PPP Loan Forgiveness webinar.
Is the FTE potential reduction calculated on a cumulative basis or is it one an individual employee by employee basis. What if we had a part-time employee in the base period who is no longer employeed during the covered period but we hired another part-time person for that role in the covered period, do they cancel each other out?
These employees would cancel each other out. The FTE evaluation is on an overall perspective - If part-time person A leaves and you hire part-time person B they replace each other.
Where do you put the owner-employee or partner compensation?
Line 9 of the application: Any amounts paid to owners (owner-employees, a self-employed individual, or general partners).
This amount is capped at $15,385 (the eight-week equivalent of $100,000 per year) for each individual or the eight-week equivalent of their applicable compensation in 2019, whichever is lower.
Are equipment loan interest payments included in business mortgage interest payments?
Covered mortgage obligations include “business mortgage interest payments” of interest on real or personal property incurred before February 15, 2020.
Would a lease for a copier be included in covered rent obligations?
Covered rent obligations include “business rent or lease payments” on a lease for real or personal property in force before February 15, 2020.
For self-employed, I've seen some guidance stating you could use the amount on the schedule C for payroll calculations even if its above $100K. Your bullet point says otherwise.
The amount of loan forgiveness requested for owner-employees and self-employed individuals’ payroll compensation can be no more than the lesser of 8/52 of 2019 compensation (i.e., approximately 15.38 percent of 2019 compensation) or $15,385 per individual in total across all businesses. In particular, owner-employees are capped by the amount of their 2019 employee cash compensation and employer retirement and health care contributions made on their behalf. Schedule C filers are capped by the amount of their owner compensation replacement, calculated based on 2019 net profit. General partners are capped by the amount of their 2019 net earnings from self-employment (reduced by claimed section 179 expense deduction, unreimbursed partnership expenses, and depletion from oil and gas properties) multiplied by 0.9235. No additional forgiveness is provided for retirement or health insurance contributions for self-employed individuals, including Schedule C filers and general partners, as such expenses are paid out of their net self-employment income.
Can you explain the health insurance/retirement contribution forgiveness for self-employed who applied prior to specific guidance was released?
No additional forgiveness is provided for retirement or health insurance contributions for self-employed individuals, including Schedule C filers and general partners, as such expenses are paid out of their net self-employment income.
Can bonuses paid during 8 week time period be included in payroll costs to be forgiven?
Yes, bonuses can be included as payroll cost as long as they are paid and incurred during the covered period or alternative payroll covered period.
We have a weekly payroll, paying on Fridays. We were funded on a Friday and then began returning people to work the next Monday - the beginning of our pay week. It sounds like we get to include 9 payrolls - the week paid the week after funding (incurred before funding) plus the eight weeks incurred during the alternative coverage period. Is that correct?
Yes, you have an extra week due to inclusion of incurred and paid payroll cost.
Union H&W benefits paid monthly for April but only part of month is period; can we include the entire monthly payment or just the prorated portion?
There is no current guidance on union dues being included as part of payroll cost.
What if the company does not fund the 401(k) match each pay period, but after year end? Can the amount of 401(k) match earned be included?
No, payroll costs incurred but not paid during the Borrower’s last pay period of the Covered Period (or Alternative Payroll Covered Period) are only eligible for forgiveness if paid on or before the next regular payroll date. Year-end would not be your next payroll date.
If an employee voluntarily quit, where do we enter this information?
When an employee of the borrower is fired for cause, voluntarily resigns, or voluntarily requests a reduced schedule during the covered period or the alternative payroll covered period (FTE reduction event), the borrower may count such employee at the same full-time equivalency level before the FTE reduction event when calculating the FTE employee reduction penalty. Borrowers that avail themselves of this exemption shall maintain records demonstrating that each such employee was fired for cause, voluntarily resigned, or voluntarily requested a schedule reduction. The borrower shall provide such documentation upon request.
Do we include overtime hours in the full time employee calculation?
No, the maximum number of hours to consider full-time is 40 which allows a quotient of 1.0.
The amount of loan forgiveness can not exceed $100K if you annualize during the 8 week period OR annualize any 1 pay period?
The amount of loan forgiveness requested can be no more than lesser of 8/52 of or $15,385 per individual in total.
For the average FTE calculation is the .10 rounding for the grand total or by person?
Round is by person.
Received PPP Loan funding on April 21. First payroll paid thereafter was 4/30 for the period 4/16-4/30. Which dollar amount is included in computation? (a) period 4/16-30 or (b) 4/21-30?
What is included in internet access? Is that only applicable to payments made to employees for their access to their internet? What about payments for hosting websites, access to email, LinkedIn fees, CRM fees, etc.?
Per guidance only the Internet fees, not payments to hosting sites, etc. would be includable.
Can rent paid prior to the funds received be included in forgiveness amount?
No, only non-payroll costs paid and incurred during the covered period can be included.
Can we have more than one pay period, such as biweekly and monthly?
We had to hire people through a temp agency. Do they count as a payroll cost?
This depends on the set-up:
- PEO/Paymaster: This is typically a shared employer relationship – they are your employees just paid by someone else. Our interpretation is that these are included in the count.
- Staffing Agencies: These are paid through the staffing agencies. Our interpretation is these are excluded. They aren’t really your employees, and no employer-employee relationship exists.
We pay storage fees for food (we are a food pantry). Can I use those expense as rent?
No, these fees would not be included.
If an employee has an ownership interest (less than 10%), is that employee considered an owner or an employee for purposes of the PPP Loan Forgiveness?
Owner-employee per standard guidance exist for 10% and up ownership.
Assuming a single member LLC (self-employed schedule C), if annual net income is, say $34K from 2019 return, then the forgivable amount is 8/52?
Yes, that is correct.
On the application for a self-employed person, is the number of employees 1 or 0 or "self?"
Is employee insurance coverage considered a payroll or a non-payroll expense?
Health-insurance benefits are considered payroll cost.
If a rent payment was delayed because of insufficient cash, can an April rent payment not made until May be considered an appropriate non-payroll expense?
Only if paid and incurred during the covered period.
We have religious exemptions for each entity. So in total we exceed $2Mil, including affiliates, but the exemption is applied on an entity-by-entity basis. Do I need to check the $2Mil box on slide #9?
If you exceed $2 million you need to check the box.
Are employer paid benefits (i.e. 401k match, ER medical expenses, etc.) separate from gross regular wages for purposes of the $100k cap?
Yes, the $100,000 cap applies to salaries/wages only.
How do you report overtime?
Overtime does not count extra. The quotient used would still be 1.0.
Is the amount permitted for retirement limited to what would typically be paid during the 8-week period only? Or if a business pays quarterly, would a full quarter be permitted?
Only the amount paid and incurred during the chosen covered period can be included.
Can you briefly explain the 13-week planning model?
The 13-week cash flow model is used in various forms of quarterly strategy and planning sessions. It gives a reasonable view of the health of the company. A 13-week cash forecast should be able to identify when and how any potential liquidity shortfalls should hit a company. This therefore offers the ability to prepare for, if not rectify, any issues before they occur. A 13-week cash forecast is also often a requirement for bank reporting, or when submitting any lending requests.
Interest on line of credit - eligible or not?
The guidance specifically talks about mortgage interest.
Can we prepay health insurance for future months and have this included in the Payroll calculation? (For example, paying the July health insurance coverage in late mid June in addition to paying the June coverage?)
No, prepayments are not allowed under the guidance. All cost have to be paid and incurred during the covered or alternative payroll covered period.
Is company paid life insurance & LTD considered a payroll expense?
This is still an area of uncertainty. We do not have any guidance the employer-paid insurance is includable in compensation, nor do we have guidance that is excluded. This is deemed compensation by the IRS if paid on the employee’s behalf, but we can’t say with certainty one way or the other on forgiveness.
If we developed a report to calculate the schedule worksheet questions, do we still need to complete the worksheets and schedule A?
While another form of documentation can be used, the worksheet should still be completed and maintained as noted in the SBA guidance.
For any employee making over a $100,000, we are paying the difference not using PPP money. Is that correct and how do we show that?
You can pay employees above $100,000 annually, but you can only ask for forgiveness for 8/52 of their compensation.
Do "guaranteed payments" to LLC members count? even if they do not flow through Payroll?
Payroll cost paid and paid and incurred, capped at the amounts noted for self-employed, owners, etc. can be included.