The PPP Loan Forgiveness Application was released on Friday night. We’ve summarized some of the key clarifications the application provided. We are still awaiting further clarification from the SBA. There is no immediate action needed at this time. The deadline to submit the loan forgiveness application is October 31, 2020.
Payroll Dates
If you run a bi-weekly (every 2 weeks) or weekly payroll, you have two options:
For loan forgiveness you can elect to calculate your payroll costs for the 8 weeks using the first day of the first pay period following the PPP Loan Disbursement Date. For example, if the Borrower received its PPP loan proceeds on Monday, April 20, and the first day of its first pay period following its PPP loan disbursement is Sunday, April 26, the first day of the Alternative Payroll Covered Period is April 26 and the last day of the Alternative Payroll Covered Period is Saturday, June 20.
OR
The first day of the Covered Period (8 week period for loan forgiveness) must be the same as the PPP Loan Disbursement Date. For example, if the Borrower received its PPP loan proceeds on Monday, April 20, the first day of the Covered Period is April 20 and the last day of the Covered Period is Sunday, June 14.
If you run Semi-monthly (twice a month) or monthly payroll:
The first day of the Covered Period (8 week period for loan forgiveness) must be the same as the PPP Loan Disbursement Date. For example, if the Borrower received its PPP loan proceeds on Monday, April 20, the first day of the Covered Period is April 20 and the last day of the Covered Period is Sunday, June 14.
If you have a payroll with the pay period between the date you received the PPP funds the pay amounts from that payroll will be prorated for loan forgiveness. For example if a payroll covers April 16th-27th employee hours, the pay date is April 30th, and you received PPP funds on the 20th, the covered period would be 8 weeks beginning April 20th. For the April 30th pay date, you would need to prorate the amounts paid for April 20th-27th when calculating loan forgiveness as the covered period begins April 20th. The hours paid for April 16-19th would not be considered forgivable as they are outside the covered period.
Owner Wages
The application has specific language for owners/ general partners in regards to loan forgiveness.
If an owner/partner made over $100,000 in 2019 in gross wages, their maximum forgiveness is $15,385 (the eight-week equivalent of $100,000 per year) for the 8 week covered period. It appears from the application that the owner/partner will be limited to the $15,385 (including salary, retirement contributions and health insurance).
If an owner made less than $100,000 in 2019, their maximum forgiveness is limited to the equivalent of their 2019 payroll compensation. For example if an owner made $80,000 in gross wages in 2019, their payroll forgiveness will max at $12,307.69 for the 8 week period (($80,000/52*)*8 weeks). We believe that employer retirement or health insurance costs can be included to reach the $15,385 maximum.
Rehire Letter for Employees
If you have employees who have refused to come back to work, please call us to discuss. There is a provision in the application that would prevent that employee being counted against you for loan forgiveness purposes if you have the proper documentation.