Our CARES Act Research and Response Team has been actively advising clients and answering questions from businesses about PPP loan forgiveness and eligibility. Below are the answers for questions submitted during our recent webinars.
Q: Can Workers Compensation Insurance premiums be included as part of payroll expense?
A: Workers compensation insurance premiums are not included as the covered expenses for the PPP loan forgiveness.
Q: Can you prepay rent?
A: We would not recommend “pre” paying expenses. The guidance states that funds are for expenses incurred or paid during the covered period. However, we believe it is OK to pay expenses in the ordinary course of business as you normally would.
Q: Is accrued interest for the PPP loan forgivable? If so, is it only for the covered period or up until the forgiveness app is submitted?
A: Accrued interest on the forgivable loan amount is also forgiven. Interest on the unforgiven loan amount will start to accrue on the loan origination date.
Q: If you receive funds from the EIDL and PPP, how do you calculate forgiveness? Also, it states that the EIDL cannot be used to refinance long term debt. What would be included in that?
A: With the new legislation passed on December 27, 2020, the EIDL Advance Amount will no longer reduce the amount of forgiveness available on the PPP loan. Without further guidance, we believe long term debt is any debt with a maturity over 12 months.
Q: Are 1st quarter payroll expenses that were paid during the covered period eligible?
A: Yes, as long as the SUTA and city taxes were paid within the covered period.
Q: It looks like employer paid health insurance premiums and employer retirement contributions do NOT count toward the $100k cap. Is that correct?
A: Yes, the 100k cap is on the gross cash compensation.
Q: If an employee works OT, are they maxed at 1 FTE using the 1st FTE calculation?
A: Yes, an employee cannot count for more than 1 FTE per week/pay period no matter what calculation is used.
Q: Our loan was approved based on an application that included 1099 contractors in the payroll amount. Since that time, we’ve learned 1099s would not be forgiven. What are our options in response?
A: Per a new SBA Procedural Notice dated January 15th, 2021 a borrower may not receive loan forgiveness for any amount that exceeds the correct maximum loan amount. This is true whether the excess loan amount was caused by borrower error or lender error. Hence the most you will be able to get forgiven is 2.5 * average monthly payroll not including payments to contractors.
Q: Are group dental insurance premiums included?
A: Yes, dental insurance premiums are included as eligible payroll costs.
Q: I did not understand the Alternative Covered Period. We received our loan on April 8th – we pay for the 1st to the 15th on the 15th and we pay 16th through last day of month is paid on the last day of the month. Can we use the full payroll paid on the April 15th? Or do we lose part of the 8-weeks salary?
A: The Alternative Payroll Covered Period is no longer applicable. The Consolidations Appropriations Act of 2021got rid of alternative covered periods. Now you have the option to use a covered period of no less than 8 weeks and no more than 24 weeks, starting on the day funds were received.
Q: Can you use PPP funds to buyout PTO accrual that incurred during this time?
A: There are safe harbors for covering separation costs of payroll, so this should fall under that umbrella.
Q: PPP loan received 4/17, utility service period is 3/20/20 to 4/22/20, how many days to cover? Do we need to pro-rate?
A: You can include the full payment as eligible expenses since the funds were paid during the covered period.
Q: Will the expenses that were covered by PPP forgiveness be deductible on 2020 taxes?
A: Yes, the Consolidations Appropriations Act of 2021 gave clarification that expenses paid with PPP funds are tax deductible.
Q: If we received the funds on 4/15/2020. The first pay date after that was 4/17/2020. This was for wages of 4/9 to 4/15/2020. Will all of that week count or only the 4/15 date?
A: The entire payroll paid on 4/17 would be allowable for forgiveness. Payroll incurred during your covered period and paid just outside your covered period is also included. So The latter would need to be prorated for work incurred during the covered period.
Q: I would like clarification on utilities. If you had utilities bills that were due prior to the 8 week loan period but you actually paid them during the 8 week, are those eligible?
A: Yes, if they were paid during your covered period, these costs are eligible.
Q: I applied for PPP during the 1st week and never heard back. What can I do?
A: We would recommend contacting your banker and follow up on the status with them.
Q: Would Company Internet charges be considered utilities?
A: Yes. Electricity, gas, water, transportation, telephone, or internet access for which service began before February 15, 2020 are eligible.
Q: Is PPP loan amount forgiven going to be counted as income for companies?
A: It will be book income, not taxable income. Under the Consolidations Appropriations Act of 2021, PPP Loan proceeds are not included in income and expenses paid with forgiven funds are tax deductible.
Q: Has anything changed that a 1099 employee can be counted towards the total PPP Loan
A: Nothing has changed. 1099 contractors should apply separately.
Q: Would applying and/or receiving these funds be something that might flag a return for an audit?
A: Not to our knowledge.
Q: Any insight as to whether they are considering allowing companies to choose the 8 week period to use the funds and not just starting the clock on the day the funds are deposited?
A: Per the Consolidation Appropriations Act of 2021 a company can chose a covered period no less than 8 weeks and no more than 24 weeks. The ideal covered period is highly dependent on each unique situation.
Q: What is the measurement period to determine each employees wage since we have to pay them at least 75% of their wages?
A: Compared to Q1 of 2020
Q: Can equipment lease payments for equipment be considered for forgiveness?
A: To our knowledge, yes.
Q: Our bank would not allow ESOP contributions to be considered when determining the loan amount, although other banks allowed them. Since an ESOP is technically a retirement account, are contributions made in the 8 week time frame be forgivable?
A: Yes, if made during the covered period.
Q: Does the loan cover income from S corp in addition to W2 wages? For example income that appears on 1040 Line 7a from > Schedule 1 line 5 from > Schedule E S corp line 32
A: Eligible uses only include wages for S-Corp owners, not pass-through S-Corp income.
Q: I have heard different dates about 8 weeks and 6/30 what is the date range where loan money needs to be used for forgiveness?
A: Expenses paid for costs that were incurred or paid during the covered period will be eligible for forgiveness. If there are costs incurred that are paid on or before their next due date (but after the covered period:, those are considered eligible for forgiveness. The covered period can be anywhere from 8 weeks to 24 weeks at the election of the borrower.
Q: If I received my $10,000 EIDL grant after my PPP was funded do I still have to deduct it from what is forgivable on the PPP?
A: No. Receiving an EIDL grant does not reduce the allowable forgiveness.
Q: If you paid out bonuses in March for 2019 incentive comp will that effect the 25% pay reduction threshold?
A: The 25% reduction compares the average hourly rate or average salary wage paid during Q1 of 2020 to the average hourly rate or salary wage paid during the covered period.
Q: If my loan is for $100,000 and I don’t hit the $75,000 for payroll and lets say I only hit $60,000 yet have satisfied my full time requirement, how does this work with for rent and utilities then in this example?
A: The Paycheck Protection Program Flexibility Act of 2020 has changed the ratio in order to achieve forgiveness. At least 60% of funds must be used on payroll costs and up to 40% of funds can be spent on non-payroll costs. If less than 60% is spent on payroll, the maximum forgivable amount will be less than the full loan amount.
Q: My office is going to start seeing patients next week. Can I still use the PPP money to pay my assistants?
A: Yes, if the costs are paid or incurred during the covered period.
Q: What percentage of loan can be used for rent/utilities/mortgage etc? If you change your business for a portion of your home is that charge legitimate for loan forgiveness?
A: Based on current SBA guidance, business use of home expenses is not eligible if it was not used and claimed as a business expense on your 2019 tax return. For maximum loan forgiveness, up to 40% of your loan proceeds can be used for expenses other than payroll costs.
Q: Can lease vehicle payments for vehicles used by salespersons be included in the 25%?
A: SBA clarified that rent obligations include leases for both real and personal property (equipment used for business:. – we may want to clarify it is no longer 25% but rather 40%
Q: How does an employer document compliance with the requirement of using at least 75% of PPP funds for payroll?
A: Keep good records (through spreadsheet, accounting software: of how the money is spent during covered period. New law states that 60% must be used on payroll instead of 75%. The SBA has released guidance on which documents are required to show support for these payroll costs in the forgiveness application, including quarterly Form 941s and 3rd party payroll reports.
Q: Can an employee choose to remain furloughed and how does this effect our loan for forgiveness?
A: This is one of a few exceptions that will not affect your forgiveness regarding FTE counts. I would recommend having written proof of the offer for rehire that was rejected by the employee. Check out our blog for the details of these exceptions.
Q: Do I need to utilize all of my FTE?
A: There’s a calculation. Check out our forgiveness calculator.
Q: Do I need to utilize all of my FTE’s during my 8-week period, or just restore then to the Feb. 15th level by June 30?
A: There is a safe harbor that you can have your FTE counts restored by (payroll period that includes the date of: 12/31/20 compared to (payroll period that includes the date of: 2/15/20. If your counts are restored during the covered period, the safe harbor is not necessary.
Q: Is the salary cap of $100k during the 8 week PPP period based on the payroll cycle of the company (24 or 26 pay periods: or based on a 100k/52weeks/ x 8 weeks scenario?
A: $100k is max salary for the year. Employees are capped at $15,385 ($100k/52 weeks*8 weeks: for an 8-week covered period or $46,154 ($100k/52 weeks*24: for a 24-week covered period. As an example, if you choose a covered period such as 12 weeks the cap is $23,077 ($100k/52 weeks *12 weeks:. Owner-employees are capped at $15,385 for an 8-week covered period or $20,833 for a 24-week covered period ($100k/12 months*2.5 months:.
Q: Will self-rent be considered an eligible use during the covered period?
A: Rent paid to another entity with common ownership is eligible to the extent of the mortgage interest paid on the same property for that period. For example, if rent is $2,000/month and the mortgage interest for that property is $700 for that month, $700 is an eligible expense.
Q: Is paid overtime included? Can we give out our year-end bonuses early?
A: Overtime or bonuses incurred during the covered period can be included.
Q: Can I replace employees with new hires? How does this effect the criteria that each employee must make 75% of prior wages? And do those need to be paid during the 8 weeks or just restored by June 30?
A: Yes, if you hire new employees by the end of the covered period, you might be eligible for the safe harbor. This safe harbor can be utilized if FTEs were reduced between February 15, 2020 and April 26, 2020. Check out our calculator to see if you are eligible for maximum loan forgiveness.
Q) What if I receive a PPP loan on a certain date but cannot open yet. How is the covered period determined?
A) The covered period starts the day you received the funds. It is not contingent upon your physical location being opened.
Q) Is it okay to pay hazard pay to employees? Is that an expense that can go towards the PPP loan/grant?
A) Yes
Q) Any difference in loan forgiveness criteria for government entities?
A) Not at this time
Q) Can we pay the commissions to our 1099 folks?
A) Payments to 1099 independent contracts are not included as eligible costs.
Q) Is a IMRF (state pension plan) a covered benefit expense?
A) We believe so.
Q) Can the board accrue a bonus to an employee within the covered period and have the bonus count?
A) As long as the bonus has been earned/incurred during the covered period.
Q) Please address the 8-week timing – the date you get funds does not coincide w/ payroll timing. Also, if you pay on 15th and last day of month, 4 payrolls is a few days longer than 8 weeks – will that be OK?
A) For payroll costs, you can choose which covered period to use: either beginning the date loan proceeds are received or beginning the date of first payroll after the date loan proceeds are received. With the first period measurement, as long as payroll costs have been incurred (even if incurred before beginning the covered period), they can be paid with loan proceeds. If there are payroll costs that have been incurred during covered period and paid on or before date of next payroll (even if after covered period), they can be paid with loan proceeds.
Q) Is it based on actual payroll paid during the 8-week period or do we take EE pay rates and calculate 8 weeks’ worth of pay (salaried EEs)
A) Calculation for forgiveness will be based on payroll paid or incurred during the covered period.
Q) I received my funds on 4/16. I typically pay semimonthly on the 15th and last day of the month which means I would only have 3 pay periods. Can I switch to Bi-Weekly, so I have 4 pay periods in the 8 weeks?
A) Yes
Q) Is dental insurance eligible?
A) Health coverage of any kind is included.
Q) For an employee that makes less than $100k, if an employer wants to pay them for unused vacation hours, can those wages count towards your forgiveness calculation if they also get regular wages for that same week they get vacation pay?
A) We believe so.
Q) What if you’re an owner of an s corp but you are considered an employee of the business?
A) You would apply using all payroll costs including yours.
Q) As an independent contractor, how do I justify paying myself?
A) Move it out of the account the loan proceeds came into, just like you do normally.
Q) You cannot deduct you workman’s comp insurance? What about union fringe benefits that we pay to the union that make up a large expense to our payroll.
A) It appear at this time the fringe benefits are not accepted
Q) We are a school, and new contracts were provided prior to Covid-19, but don’t go into effect until 6/1/2020. Is there an issue with forgiveness if salaries decrease slightly during the 8 week period?
A) Not if they decrease based on a contract put in place PRIOR to any discussion of the PPP Loan.
Q) Are copier leases included?
A) Depends on the purpose of the copier lease and when the contract (if any) was put into place.
Q) Is sewer included as a utility?
A) Yes
Q) If we use some of the loan funds to bonus employees, does it have to be equally disbursed based on their wages or can bonus only specific employees, or certain employees at a higher percentage than others?
A) No limits on whom it’s paid to – watch for not paying $100k annualized to any employee.
Q) Would rent to an owner-occupied holding company be forgivable?
A) Yes as long as it’s a written lease agreement in a separate location (not your home).
Q) Will cell phone costs (business plan) be considered a utility?
A) Yes
Q) Can accrued vacation for employees from previous to the 8 week period but paid in 8 week period count as payroll cost for forgiveness?
A) Sounds correct – as long as it’s paid in 8 week period.
Q) If a company is self-insured, on their medical plans, can accruals for future expected medical claims costs be forgiven?
A) In order to be eligible for loan forgiveness, expenses must be incurred – avoid prepaying expenses.
Q) Are workers from home allowed to lump their internet cost into business internet costs if they are working from home?
A) If it’s included in the utility category, it appears to be an allowable expense if it’s paid out of company cash flow.
Q) Are franchise fees included in the type of expenses that can be forgiven?
A) No
Q) We run a plumbing company and have lease agreements on the trucks. Is this a qualified expense?
A) Sounds like they would be – waiting on SBA guidance.
Q) Does parking qualify? We pay for employee parking in a garage next to our office building.
A) That’s a tricky one. If it’s included in your office rent lease agreement, possibly.
Q) In regard to the FTE calculation, what happens if a team member retires or just does not want to come back to work? Does that affect you in the calculation?
A) Check out the FTE reduction exceptions.
Q) What happens if we do not meet or exceed the FTE / salary requirement? Do we lose full forgiveness of the loan or just some portion that was missed below the target?
A) It’s a calculation with a phaseout. Check out our loan calculator.
Q) Can we expect the treasury to finally issue their final ruling so banks can no longer say “waiting on further guidance from SBA”?
A) We certainly believe further guidance is forthcoming, but we are all in the same boat. Once received, it will certainly be made available to all.
Q) How do I code thee PPP deposit into my accounting system.?
A) Debit Cash; Credit Liability
Q) We had debt in place in 2/20 but refinanced it in 3/20. Can the interest on the new loan included?
A) It appears 2/15/20 is the magic date.
Q) As far as calculating the forgiveness amount, if the company’s books are on the accrual method and taxes are cash, which method is used for the forgiveness calculation?
A) Cash basis.
Q) We have mostly part-time employees, whose pay fluctuates. We are currently closed. Do we simply take an average amount per pay period from 2019 to pay them until we open? Once we open, it is likely that we will not need to be fully staffed. In that case, do we continue to pay from the average wages for last year?
A) You need to pay them based on period that you will use to apply for forgiveness.
Q) Can we include in our payroll cost the flat rate bi-weekly cell phone payment we pay our clinical staff to perform call coverage?
A) Sounds like it’s compensation and should be included in eligible payroll costs.
Q) What are your thoughts about the 401K matching contribution that needs to be made for 2019? We normally fund this during the first six months of the year for the previous year.
A) You certainly can pay that during the 8-week period, however if someone leaves before you normally would match it, then that person received a benefit that they wouldn’t have.
Q) We signed a lease for a new office Sep’19, ready to occupy May’20. Is it ok to include rent starting May?
A) Yes, if agreement was in effect before 2/15/20.
Q) Regarding maintaining wage levels, if an hourly employee still had the same rate but didn’t work as much overtime, would this affect the calculation?
A) It’s a double calculation using your loan proceeds during the 8 week period maintaining your wage base and an FTE calculation.
Q) So I can spend the PPP on more than just the 8 week of the interests on the real property?
A) You can, but it wouldn’t all be forgivable.
Q) Does the 25% wage reduction clause apply to tipped employees? Their wages fluctuate frequently, how do we calculate what we will pay them if they are now not actually receiving tips?
A) Based on total wage base for the period you select.
Q) Is loan forgiveness reduced on a prorated basis? Not all or nothing?
A) Generally, yes.
Q) I have set up a separate account for PPP funds. However, utilities are paid automatic withdrawal from a separate account. Will it be enough to maintain records but reimburse the account from where the auto pays are established?
A) Yes.
Q) On full time equivalent, the key is to have it up BY JUNE 30th and not necessarily the entire time of the 8 week?
A) You should restore average FTEs during 8 week compared to one of two periods. If you restore FTEs by 6/30 to match 2/15/20, you might achieve the rehire exemption.
Q) Is a FTE calculated the IRS 30 hour guidance or do we use 40 hours per week?
A) SBA guidance informs us that FTEs are calculated based on 40 hour/week.
Q) As a Sub-S shareholder of my business, I own our building, (that houses said business), that is set up as a LLP. Does the rent the Sub-S business pays qualify for forgiveness even though the rent comes to me via this LLP?
A) Sounds correct.
Q) FTE Question – We started operations in 5/19. Can we still use the 2/15/19 – 6/30/19 period to compute the FTE for comparison?
A) If you opened after June 30, 2019 then you are considered a “new business” and have to use 1/1/2020 – 2/29/2020 as your average FTEEs, and you can use that same time period to determine your loan amount. If you opened prior to June 30, 2019, you can use either 2/15/2019 – 6/30/2019 or 1/1/2020 – 2/29/2020 to establish your baseline FTEEs, whichever is more advantageous.
Q) To receive loan forgiveness, do you submit a request to the bank who gave you the loan? Or do you go straight to the SBA?
A) You will provide your application for forgiveness along with appropriate documentation to your bank who will then submit the application to the SBA.
Q) We pay a company to store and retrieve our closed files. We pay them a base monthly fee to store our closed files. Would this be a qualifying “rent” for loan forgiveness purposes?
A) The CARES Act says, “rent payments on lease agreements in force before February 15, 2020,” and does not specifically limit it to real estate.
Q) Is the FTE test also a 25% reduction or does it need to stay exactly the same?
A) They are separate tests: FTEs and 25% reduction.
Q) Would interest on debt secured by guarantees from investors be included (i.e. no business assets pledged as collateral) if investors pledged CD/investment accounts for guarantee?
A) We don’t believe so – debt has to be secured by real or personal tangible property.
Q) As a school, we only employee part time employees for a 10month period Aug-May. the school is paying all hourly employees their normally anticipated hours through the end of the school year. Therefore, with 2.5weeks left of our loan period, our FTE employees will decrease based on the seasonal fluctuations of our business. Will this negatively impact our forgiveness?
A) Sounds like it – please use your baseline as defined by the Act for “seasonal employees”.
Q) We have employees who don’t want to return (fear of covid, making more on unemployment) so we will need to replace them with new hires. How does that affect the comparison of an individual’s wages and not dropping them more than 25%?
A) It’s based on your total wage base and FTE count. Check out our loan calculator.
Q) Is it necessary, or advisable, to set up a separate account for the PPP loan proceeds? We just put them into our regular account.
A) Either is fine. Keep good records.
Q) If I have 5 part time employees each working 15 hours per week, how many FTEs do I have?
A) Based on the information provided, you have either 2.0 FTEs or 2.5 FTEs.
Q) When calculating your PPP amount, will a bank use your 2019 taxes or last 12 months (i.e. March 2019 to March 2020)?
A) This is a good question for your banker.
Q) What happens if you reduce FTEs after the 8 weeks but before 6/30?
A) The timeframe to reduce FTEs was 30 days after signing of the CARES Act (last day is April 27). If you reduce during the 8 weeks, you have until 12/31/20 to restore FTE levels.
Q) Is it ok to pay furloughed employees during the 8 weeks even though not working to maintain the FTE’s and salary levels?
A) If they are drawing unemployment during furlough period, you cannot pay them regular salary.
Q) Is the employee portion of federal income tax, social security and Medicare included in wages?
A) Yes
Q) Our PPP loan was based on calendar 2019 which include all bonuses for the year. Can I bonus now based on an average of what their bonuses were last year? YE is always the biggest bonus.
A) Yes.
Q) So for the FTE numerator, if you wait to rehire until let’s say 6/28, that would count as a rehired FTE?
A) Yes.
Q) I have a staffing agency and 4 full time employees for my agency and some employees that are staffed part time to other companies and 2 contract labors. Will each of these scenarios be forgiven?
A) If they are on your payroll. 1099 contract laborers are not.
Q) June 30 -FTE’s and wages need to be restored by June 30, so does that mean we don’t need to get the full number of FTE’s and have 75% of salaries during the 8 weeks, just have the same number on the exact date of June 30 that we had on the exact date of Feb. 15?
A) FTEs should be restored by 12/31/20 to what they were on 2/15/20 and 75% wages will meet safe harbor requirements.
Q) How do you count employees that are on severance prior to 2/15 or loan date who you are still paying out during this period? are they included in FTE? are the funds from PPP allowed to be utilized for the severance?
A) If they are on your payroll, then any cost will be included as such. Continued severance payments would appear to meet that definition
Q) Small business – 3 employees (2 owners, 1 assistant). Assistant is making more on unemployment and doesn’t want to return. Can assistant be replaced with owner’s spouse at 75% of assistant’s salary to achieve maximum forgiveness? I haven’t found anything that would prohibit this. Thoughts?
A) We haven’t seen anything that would prohibit this either.
Q) What transportation costs count?
A) Gray area – waiting on SBA guidance.
Q) If headcount (FTE) levels do drop, does that mean that 0% of the loan is forgiven? Or is there a formula for partial reduction of the loan?
A) Partial reduction. see our loan calculator.
Q) What if rent and utilities are paid to a related company thru a monthly management fee. Should it be separated on a separate statement for the 8-week period?
A) We recommend keeping good (specific) records on what was paid with the loan proceeds.
Q) Prior (week of 3/9/20) to the covid-19 situation I had to let my Operations Manager go with cause. As the owner I have taken on that role. With the increase in responsibility can I increase my salary during this PPP forgiveness period.
A) Owner-employee compensation is limited to the lesser of $100k annualized or 8/52 of 2019 compensation. Any excess paid to an owner-employee is eligible use of PPP funds but will not be forgivable.
Q) If you don’t use 75% of the loan proceeds on payroll does that mean none of the loan will be forgiven or will you at least get the money you spent on payroll forgiven?
A) Partial loan forgiveness. If you don’t use 75% of the loan proceeds on payroll does that mean none of the loan will be forgiven or will you at least get the money you spent on payroll forgiven.
Q) Can costs for company-paid life insurance and short-term disability be reimbursed?
A) No.
Q) Does $100K salary limit include both salaries paid and employer paid benefits?
A) 100K is for salary. Add benefits on top of that plus retirement and health insurance.
Q) Can an owner of S Corp increase salary to maximize forgiveness? What if the owner was not taking a salary?
A) With new SBA guidance, we learned that owner-employees cannot pay themselves more than the lesser of $100k annualized ($15,385) or 8/52 of 2019 wages with loan proceeds. The wages paid over this amount will not be eligible for forgiveness.
Q) Regarding FTE – For full forgiveness I need to meet 10 FTE per week, which would be 80 during 8-week period. If I only can achieve 5 per week during 8-week period but have restored to average of 10 per week by June 30 will this provide for full forgiveness?
A) I would run that scenario through a loan calculator.
Q) We paid annual bonuses on 3/31…so some employees making <$100K annualized will earn more per month in 1Q2020 vs during the 8 week period. Will this trigger the reduction clause?
A) Not sure without seeing all the facts. you can choose the benchmark period that is most beneficial for your FTE count – check out our loan calculator.
Q) Does the forgiveness just become a book/tax difference / M-1 item on the tax return?
A) Sounds correct.
Q) Are board fees allowable payroll expenses?
A) Potentially, if paid on a w-2.
Q) We weren’t able to pay Q1 incentive pay to employees. can we pay this with PPP funds even though it was incurred prior to PPP funds receipt?
A) Sounds correct.
Q) I am an owner of an S-Corp, paid as an employee. I make $120,000 salary. Can I deduct any/all of my salary for forgiveness?
A) Not your full salary for the year since your application was based on 100,000 / 12 * 2.5. Owner-employee compensation is limited to the lesser of $100k annualized or 8/52 of 2019 compensation.
Q) If your company is a partnership and takes monthly draws from the company, can it apply for the PPP since no taxes are taken from these payments?
A) Yes, you file one PPP loan for the company and all partners. There is SBA guidance on this point – work with your banker.
Q) What if we have never paid bonuses to employees before? Would that flag something when audited?
A) Probably not. these are uncertain times and employees are being asked to do unprecedented things (wfh and home school at the same time).
Q) We had a payroll with a pay date of 4/15, we were funded on that date. We should include that on the PPP?
A) Yes.
Q) What about employees that are off on FMLA for maternity? They are unpaid after they have used all of their PTO?
A) The SBA’s interim final rule provides that payroll costs include salaries, wages, commissions, tips, vacation pay, parental and family leave, and allowances for dismissals or separations.
Q) We typically hire new apprentices in May. Can we will still do that? How will it impact our FTE if we show that it’s higher than when we started? Can their wages be paid with PPP?
A) Same or higher FTE is not an issue as long as the calculation is accurate.
Q) Employer matched taxes for payroll are not forgivable?
A) These taxes should be excluded from payroll costs and not paid from loan proceeds. otherwise you could jeopardize loan forgiveness.
Q) For retirement plans, I assume this is what the company puts in and not the employee?
A) Correct, it’s the match using gross wages.
Q) For a 1099 Independent Contractor do you need to set up some type of weekly or monthly salary?
A) Move cash out of your business account to your private account to show it was paid.
Q) We have a 100% employer sponsored 401k with a 3% safe harbor. Do I pay the safe harbor based on a maximum of $100, 000 or can I pay in 3% of the expected $175,000 earnings?
A) Everything is capped on a salary of $100,000.
Q) SUTA tax accrued in 1st quarter but paid end of April (within PPP loan period) include in loan forgiveness or not?
A) Sounds correct
Q) I thought taxes were included, now I see federal taxes are not? What are employer matched taxes?
A) Employer matched taxes are employer portion of social security and Medicare taxes.
Q) Is the forgiveness limited to individuals that were employed last year since it’s an employee by employee calculation? Or if we hired someone in April, would their payroll expense be forgivable?
A) You can choose the benchmark period that best suits you. And the calculation is based on total wage base.
Q) So, the leftover amount that’s leftover for 1% loan, those funds still have to be used for qualified expenses even after the 8-week period?
A) Correct
Q) We are a school and we pay our employees once a month. 90+% of our employees are salaried. If our PPP Loan date was 4-13-2020; would we pro-rate our payroll 4-13-2020 — 4-30-2020 towards our calculation for forgiveness?
A) Since the payroll for the whole month of April was incurred/earned when it was paid (during the covered period), it is includable for loan forgiveness.
Q) Will loan payments be based on the original loan amount or the revised amount after loan forgiveness?
A) Revised amount after forgiveness.
Q) Are monthly trash hauling and monthly security alarm bills considered utilities?
A) Yes
Q) Restoring FTEE headcount is straightforward, but how do you actually restore wages? Lump sum?
A) That would work.
Q) I received the PPP and I just received an automatic deposit of $4,000 I assume for the EIDL. I had applied for both. Now what?
A) Use them for separate funds to be eligible for maximum loan forgiveness. Keep good records.
Q) If you are a 1099 independent contractor who is 100% commissioned, how do you calculate your payroll amount?
A) Self-employment income (from Schedule C) divided by 12 times 2.5 = your loan amount.
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