CARES Act PPP Loan Forgiveness Help

Please confirm any question you have with your professional advisor (banker, CPA, or attorney) that knows your specific situation. Information on this help page is for general informational purposes only.

You are not alone on PPP Loan report processing and understanding this process. If you have any questions, send an email.

PPP Loan Forgiveness Application Options:

PPP Flexibility Act (passed June 5, 2020):

Recent Paycheck Protection Program FAQs:

Helpful Outside Articles and Resources:

Curious on the loan forgiveness guidelines the lenders must follow?

Preparing and Applying for Loan Forgiveness

On May 15th, the SBA provided important clarification on when the 8 or 24-week period for the “covered period” begins. See below for a technical clarification for semi-monthly payroll cycles.

Standard Covered Period (8 weeks):

Beginning on the date that the loan is funded, you have eight weeks to spend the money on qualifying purposes (payout period).

“Extended” Covered Period (24 total weeks):

The PPPFA defines the “Extended Covered Period” for purposes of loan forgiveness as the period beginning on the date the loan was originated and ending 24 weeks after the date the loan was originated.

The borrow has the option to use the “standard” 8-week covered period or the “extended” 24-week at the option. That decision can be made without penalty at the end of the 24-week period even if the 8-week period is used.

Alternative Payroll Covered Period:

For administrative convenience, Borrowers with a biweekly (or weekly) payroll schedule may elect to calculate eligible payroll costs on the first day of their first pay period following their PPP Loan Disbursement Date this provision is called the “Alternative Payroll Covered Period”.

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 (for the 8-week period.)

Borrowers who elect to use the Alternative Payroll Covered Period must apply the Alternative Payroll Covered Period wherever there is a reference to “the Covered Period or the Alternative Payroll Covered Period.” However, Borrowers must apply the Covered Period (not the Alternative Payroll Covered Period) wherever there is a reference in this application to “the Covered Period” only.

Impact of the PPP Loan Flexibility Act (PPPFA):

Existing Provision:
Under the PPP, the “Covered Period” is the time period during which an applicant may apply for, and a lender may issue, a PPP loan. There are also limitations regarding what loan proceeds can be used for during the Covered Period. Under existing rules, the “Covered Period” is defined as running from February 15, 2020 to June 30, 2020.

Flexibility Act Revision:
The “Covered Period” is defined as running from February 15, 2020 to December 31, 2020.

Groom (Legal) Comment:
PPP loans generally can only be made during the Covered Period. Thus, the new provision would effectively extend the time period during which borrowers may apply for, and lenders may issue loans.

Eligible Payroll Costs for Forgiveness Summary

Borrowers are generally eligible for forgiveness for the payroll costs paid and payroll costs incurred during the elected Covered Period (or Alternative Payroll Covered Period).

The PPPFA allows employers to choose an 8-week or 24-week “covered” period.

Payroll cost timing:

  • Payroll costs are considered paid on the day that paychecks are distributed or the Borrower originates an ACH credit transaction.
  • Payroll costs are considered incurred on the day that the employee’s pay is earned (I.e. when the hour or day is worked.)
  • Payroll costs incurred but not paid during the Borrower’s last pay period of the Covered Period (or Alternative Payroll Covered Period) are eligible for forgiveness if paid on or before the next regular payroll date.
    • NOTE: After clarification from the Treasury, a portion of payroll costs when the payroll end date does not align with the pay date is allowed in loan forgiveness calculations. This situation can happen with semi-monthly and monthly pay cycles because the pay periods are not defined by “weeks.”
    • For semi-monthly pay periods, the provided PPP Loan Forgiveness reports take into account the partial pay period allowable in the “covered period” when the pay date occurs outside the allowable period. The report considers total hours worked and then pro-rates hours based on allowable days in the period and then multiplies that factor by the period allowable expenses per loan forgiveness guidelines.
    • For bi-weekly and weekly payrolls, the client should use the “alternate covered period” by adjusting the PPP Payroll Cost report to start with the nearest pay day following the loan funding date.

Eligible Payroll costs include:

  • Salary, wage, commission, or similar compensation;
  • Payment of cash tip or equivalent;
  • Payment for vacation, parental, family, medical, or sick leave; or
  • payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums, and retirement;
  • payment of state and local taxes assessed on compensation of employees
  • Allowance for dismissal or separation.

Compensation does not include:

  •  The compensation of an individual employee in excess of an annual salary of $100,000, as prorated for the covered period.
    • 8-week covered period
      • $15,384 – for any owner or employee ($100,000 / 52 * 8 weeks)
    • 24-week covered period
      • $ 46,154 – for non-owner employees ($100,00 / 52 * 24 weeks)
      • $ 20,833 – for owners (limited to 2.5 months of compensation)
  • Any compensation of an employee whose principal place of residence is outside of the United States;
  • Qualified sick leave wages for which a credit is allowed under the Families First Coronavirus Response Act; or
  • Qualified family leave wages for which a credit is allowed of the Families First Coronavirus Response Act.

Good article on payroll limits – New PPP loan forgiveness applications released

Eligible Non-Payroll Costs for Forgiveness Summary

Eligible Non-payroll costs consist of:

  • covered mortgage obligations: payments of interest (not including any prepayment or payment of principal) on any business mortgage obligation on real or personal property incurred before February 15, 2020 (“business mortgage interest payments”);
  • covered rent obligations: business rent or lease payments pursuant to lease agreements for real or personal property in force before February 15, 2020 (“business rent or lease payments”); and
  • covered utility payments: business payments for a service for which service began before February 15, 2020 (“business utility payments”) for the distribution of:
    • electricity,
    • gas,
    • water,
    • transportation,
    • telephone, or
    • internet access

An eligible non-payroll cost must be paid during the Covered Period or incurred during the Covered Period and paid on or before the next regular billing date. This clarification allows a portion of covered expenses to be admissible even if the billing date is after the end date of the Covered Period.

  • NOTE: As with eligible payroll costs, the instructions would seem to allow borrowers to count towards forgiveness qualifying non-payroll costs that were incurred before the start of the covered period, but paid during the covered period. Additionally, can get credit for incurred amounts paid after the covered period.
  • NOTE: These non-payroll costs must be calculated using the DEFAULT eight-week covered period (not the alternate covered period.)

Eligible non-payroll costs cannot exceed 40% of the total forgiveness amount. Count non-payroll costs that were both paid and incurred only once.

The Loan Application materials include a series of formulas, calculations, definitions, etc., for implementing the two statutory reduction factors that apply in determining a borrower’s maximum forgivable amount.

  1. The first reduction factor is the “Salary/Hourly Wage Reduction” — which requires that the forgivable amount be reduced to the extent that the borrower reduced an employee’s compensation by more than 25% (excluding compensation in excess of $100,000).
  2. The second reduction factor the “FTE Reduction Quotient,” which is derived by dividing the number of full-time equivalent (“FTE”) employees during the relevant covered period by the number of FTE employees during a past reference period. Generally, it looks at whether there has been a reduction in the number of full-time equivalent employees during the relevant covered period when compared to a historical reference period.

The Loan Application materials also include a series of reduction exceptions and safe harbors that may be helpful to borrowers, if applicable. These are described below.

This calculation will be used to determine whether the Borrower’s loan forgiveness amount must be reduced due to a statutory requirement concerning reductions in employee salary and wages.

Borrowers are eligible for loan forgiveness for certain expenditures during the Covered Period or the Alternative Payroll Covered Period. However, the actual amount of loan forgiveness the Borrower will receive may be less, depending on whether the salary or hourly wages of certain employees during the Covered Period or the Alternative Payroll Covered Period was less than during the period from January 1, 2020 to March 31, 2020

  1. The forgivable amount is subject to reduction if during the Covered Period or the Alternative Payroll Covered Period, the salary or hourly wages of employees listed in Table 1 was reduced by more than 25% during the period from January 1, 2020 to March 31, 2020. Any such employees will reflect a “Salary/Hourly Wage Reduction” amount.
  2. However, if the borrower subsequently restored salary/hourly wage levels, the borrower may be eligible for elimination of the “Salary/Hourly Wage Reduction” amount.
  3. It appears from the Instructions that if an employee’s salary/wages were not reduced more than 25%, their “Salary/Hourly Wage Reduction” is zero.
  4. For employees whose salary/wages were reduced more than 25%, the borrower will have to complete a formula set forth in the Instructions to the Worksheet to determine the amount of the reduction, but a safe harbor can apply if the salary/wages were subsequently increased (which would reset the “Salary/Hourly Wage Reduction” to zero).
  5. It appears that if a “Salary/Hourly Wage Reduction” applies for an employee, the total dollar amount of the reduction (i.e., the salary/wages the employee “lost” due to the reduction) over the eight-week period will be subtracted from the forgivable amount

Before applying this wage reduction factor, please read the “Safe Harbor” provision below.

The Salary/Hourly Wage Reduction is not required, however, if a safe harbor is met. Whether the safe harbor is met is determined via the following steps:

Step 1: Determine the employee’s annual salary or hourly wage as of February 15, 2020.

Step 2: Determine the average annual salary or hourly wage for the period from February 15, 2020 through April 26, 2020.

If Step 2 is greater than Step 1, the safe harbor does not apply. Compute the reduction in forgiveness as determined in Step 5, above.

If Step 2 is less than Step 1, proceed to Step 3.

Step 3: Determine the average annual salary or hourly wage for the employee as of June 30, 2020. If that amount is equal to or greater than Step 1, the safe harbor has been met.

In other words, the SBA will ignore a reduction in salary during the covered period relative to the 1st quarter of 2020, but ONLY IF that salary is restored to what it was on February 15, 2020, by June 30, 2020.

Safe Harbor Example

Assume that on February 15, 2020, A was being paid an annual salary of $75,000. After the arrival of COVID-19, however, A’s average salary for the period February 15, 2020 through April 26, 2020, was reduced to $55,000. It was further reduced for much of May, which is what resulted in A being paid only $8,000 for the covered period. By June 30, 2020, however, A’s annual salary was increased to $75,000. Even though A’s salary has returned only to the amount he was paid on February 15 ($75,000) and not the amount he was paid throughout the first quarter ($80,000), the safe harbor is met and no reduction is required.

If the safe harbor had NOT been met, A’s employer would reduce loan forgiveness by $1,230 in the “Salary/Hourly Wage Reduction” column.

Impact of the PPP Loan Flexibility Act

Existing Provision:
The loan amount that is forgivable under the PPP can be reduced if the borrower fails to maintain salaries and wages for certain employees after receiving the loan. However, the existing rules provide another safe harbor (i.e., “Salary/Hourly Wage Reduction Safe Harbor”) that if satisfied will allow the borrower to avoid a reduction to the forgiveness amount that would otherwise occur because of a reduction in employee pay relative to pre-pandemic levels.

This safe harbor is met if:

  1. The employee’s annual salary/hourly wage as of February 15, 2020 was GREATER THAN the same employee’s average annual salary/hourly wage between February 15, 2020 and April 26, 2020 and
  2. The employee’s annual salary/hourly wage as of February 15, 2020 was LESS THAN OR EQUAL TO the same employee’s average annual salary/hourly wage as of June 30, 2020.

Flexibility Act Revision:
The “Salary/Hourly Wage Reduction Safe Harbor” would apply to a given employee if:

  1. The employee’s annual salary/hourly wage as of February 15, 2020 was GREATER THAN the same employee’s average annual salary/hourly wage between February 15, 2020 and April 26, 2020 and
  2. The employee’s annual salary/hourly wage as of February 15, 2020 was LESS THAN OR EQUAL TO the same employee’s average annual salary/hourly wage as of December 31, 2020.

Groom (LEGAL) Comment:
This change would give the borrower more time to restore reduced salary/wages (if reduced between February 15, 2020 and April 26, 2020) to pre-pandemic levels to satisfy the safe harbor and avoid the potential reduction to the loan forgiveness amount.

The following explanation is quite involved. We have a report that does the heavy lifting for you.

  • A borrower’s maximum forgivable amount is multiplied by the borrower’s “FTE Reduction Quotient.”
  • To the extent the FTE Reduction Quotient is less than 1.0, it will result in a reduction in the maximum amount that is eligible for forgiveness.

Reference date range options:

Compare average number Full Time Equivalent (FTEs) per month between

  • Option 1. February 15, 2019 to June 30, 2019; or
  • Option 2. January 1, 2020 to February 29, 2020;
  • Option 3. In the case of seasonal employers, either of the preceding periods or a consecutive twelve-week period between May 1, 2019 and September 15, 2019.

Determine average FTEs

To determine the average full-time equivalent employees (FTEs) for the covered period, the employer has two computation methods. For each qualifying employee:

  • Standard Method
    • determine the average number of hours worked per week and divide by 40, before rounding to the nearest tenth. The maximum amount for each employee is 1.0. Or,
  • Simplified Method
    • use 1.0 for every employee who worked 40 hours per week and 0.5 for every employee who didn’t meet that standard.

To determine the FTE Reduction Quotient, the borrower then divides its “Total Average FTE” by the “Average FTE during the Borrower’s chosen reference period.”

Example

X Co. borrowed a $100,000 PPP loan on April 10, 2020. X Co. incurred $100,000 of costs eligible for forgiveness over the next 8 weeks.

For the 8-week period beginning April 20, X Co. had the following employees:

  • A, who averaged 45 hours per week during the period,
  • B, who averaged 40 hours per week during the period,
  • C, who averaged 28 hours per week, and
  • D and E, who averaged 20 hours per week.

For the 8-week covered period, X Co. had 3.2 FTEs:

  • A: 45/40 capped at 1.0
  • B: 40/40 = 1.0
  • C: 28/40 = .7
  • D &E: 20/40 = .5 each

If X Co. chose instead to use the simplified method, it would have 3.5 FTEs:

  • A: 45/40 capped at 1.0
  • B: 40/40 = 1.0
  • C: 28/40 = .5
  • D &E: 20/40 = .5 each

The actual loan forgiveness amount may be reduced if the average weekly FTE employees during the Covered Period (or the Alternative Payroll Covered Period) was less than during the chosen reference period.

The Borrower is exempt from a reduction if the FTE Reduction Safe Harbor applies.

Safe Harbor FTE Reduction

The FTE reduction will not apply if the borrower, in good faith:

  1. is able to document
    • inability to rehire individuals who were employees of the borrower on February 15, 2020, and
    • inability to hire similarly qualified employees for unfilled positions on or before December 31, 2020; or,
  2. is able to document an inability to return to the same level of business activity as such business was operating at before February 15, 2020, due to compliance with requirements or guidance issued by HHS, CDC, or OSHA during the period between March 1, 2020 and December 31, 2020 which relates to certain COVID-19 issues (specifically, sanitation, social distancing, or worker or customer safety requirements).

Other covered FTE reduction reasons

Reductions of FTEs may be excluded in the following cases:

  1. any positions for which the Borrower made a good-faith, written offer to rehire an employee during the Covered Period or the Alternative Payroll Covered Period which was rejected by the employee; and
  2. any employees who during the Covered Period or the Alternative Payroll Covered Period
    1. were fired for cause,
    2. voluntarily resigned, or
    3. voluntarily requested and received a reduction of their hours.

In all of these cases, include these FTEs only if the position was not filled by a new employee.

Any FTE reductions in these cases do not reduce the Borrower’s loan forgiveness.

Impact of the PPP Loan Flexibility Act

Existing Provision:
The loan amount that is forgivable under the PPP can be reduced if the borrower fails to maintain their full-time employee population after receiving the loan. However, the existing PPP provides a certain safe harbor (i.e., “FTE Reduction Safe Harbor”), which if met by a borrower, allows the borrower to avoid a reduction in the forgivable amount that would otherwise result from a reduction in employee headcount relative to a pre-pandemic reference period.

The existing “FTE Reduction Safe Harbor” applies if:

  1. the borrower’s total FTE in the pay period inclusive of February 15, 2020 was GREATER THAN the borrower’s total average FTE between February 15, 2020 and April 26, 2020 and
  2. the borrower’s total FTE as of June 30, 2020 was GREATER THAN OR EQUAL TO the borrower’s total FTE in the pay period inclusive of February 15, 2020.

Flexibility Act Revision:
The “FTE Reduction Safe Harbor” applies if :

  1. the borrower’s total FTE in the pay period inclusive of February 15, 2020 was GREATER THAN the borrower’s total average FTE between February 15, 2020 and April 26, 2020 and
  2. (2) the borrower’s total FTE as of December 31, 2020 was GREATER THAN OR EQUAL TO the borrower’s total FTE in the pay period inclusive of February 15, 2020.

Groom (Legal) Comment:
This change would give the borrower more time to increase its FTE count (if reduced between February 15, 2020 and April 26, 2020) until the end of 2020 (rather than June 30, 2020) in order to satisfy the safe harbor and avoid the potential reduction to the loan forgiveness amount.

The PPPFA states the loan forgiveness application deadline is ten months from the last day of the covered period.

by adding at the end the following new clause:

“(v) RULE OF CONSTRUCTION.—If an eligible recipient fails to apply for forgiveness of a covered loan within 10 months after the last day of the covered period defined in section 1106(a) of the CARES Act, such eligible recipient shall make payments of principal, interest, and fees on such covered loan beginning on the day that is not earlier than the date that is 10 months after the last day of such covered period.

https://www.congress.gov/bill/116th-congress/house-bill/7010/text

PPP Loan Forgiveness Reports

Important notes about the reports:

  • If your 8 or 24-week coverage period is not complete and if the payroll has not posted by the end date of the covered period, then the data needed to run your report is not yet entirely available and your data will be underreported indicating a lower forgiveness amount.  
  • Semi-monthly reports may require an additional payroll cycle after the 8-week end date to post before data is complete.

We’ve identified a bug on the PPP reports when printing to PDF. The data gets cutoff due to the width of the report.

The work-around is to select the “Print” from the Action Menu, DO NOT select “Convert to PDF” or “Print/PDF Page(s)”. See image to the right.


Once you print the reports needed above, you will now need to request 941-equivalent from the AdvanStaff HR tax report team. You can find the request form using the button below.

Now that additional PPP Loan forgiveness guidelines have been clarified by the US Treasury, we have adjusted versions of the reports available.

  • Full-Time Equivalent (FTE) Report with applicable look-back period data
  • Payroll Cost Report, inclusive of 8 weeks beginning on the loan start date
    • 8-week report is available
    • 24-week report is available

Accessing the Reports

Worksite managers with FULL ACCESS are able to find the reports in the manager portal. Please follow the steps below to access the reports:

1. Log on to the Manager Portal

2. In the top search bar, search for “COVID”.

3. Under “Report Suggestions”, Select “COVID-19 PPP Forgiveness Report

4. Using the drop down menu, select the type of report to run.

  • Full Time Equivalent Analysis
  • Payroll Cost Report

5. Enter the Report Start Date

  • Employers with a weekly or bi-weekly payroll can adjust the date of the report to start with their first payroll pay date following loan funding.
  • The report start date will run the report for the next 8-weeks only. The 24-week report is not available at this time.

6. See the report specific instructions below.

This report will run the analysis for the standard 8-week period you designate according to the parameters established by the SBA.

If the FULL 8 or 24-weeks of data have not yet posted to your payroll ledger, then your data is incomplete and your FTE data/numbers will be underreported.

The FTE Analysis Report compares Option 1 and Option 2 of the FTE Quotient:

  • Option 1: February 15, 2019 to June 30, 2019; or
  • Option 2: January 1, 2020 to February 29, 2020;
  • Option 3. In the case of seasonal employers, either of the preceding periods or a consecutive twelve-week period between May 1, 2019 and September 15, 2019. This option is not supported as the number of variables are too great. Please contact our office to help gather information for this report.

Instructions

1. Log on to the Manager Portal

2. In the top search bar, search for “COVID”.

3. Under “Report Suggestions”, Select “COVID-19 PPP Forgiveness Report

4. Select “Full Time Equivalent Analysis”

5. Enter the Report Start Date

The report will run the analysis for the standard 8-week or extended 24-week period you designate according to the parameters established by the SBA.

Eligible Payroll costs include:

  • Salary, wage, commission, or similar compensation;
  • Payment of cash tip or equivalent;
  • Payment for vacation, parental, family, medical, or sick leave; or
  • payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums, and retirement;
  • payment of state and local taxes assessed on compensation of employees
  • Allowance for dismissal or separation.

Compensation does not include:

  •  The compensation of an individual employee in excess of an annual salary of $100,000, as prorated for the covered period. In no situation should you enter more than $15,384.
  • Qualified sick leave wages for which a credit is allowed under the Families First Coronavirus Response Act; or
  • Qualified family leave wages for which a credit is allowed of the Families First Coronavirus Response Act.

Instructions

1. Log on to the Manager Portal

2. In the top search bar, search for “COVID”.

3. Under “Report Suggestions”, Select “COVID-19 PPP Forgiveness Report

4. Select “Payroll Cost Report”

5. Enter the Report Start Date

When applying for PPP Loan forgiveness, in addition to a payroll cost report (instructions above), your bank may require 941-type reports. Our payroll tax department team will securely email these reports to you or to your trusted advisors.

Please use the button below to request the reports or any other information.

We understand you will have many questions regarding these reports. Please open a support ticket with your detailed questions. We will get back to you as quickly as possible. Tickets allow us to research the solution, share emails with multiple staff, and to track all requests.

Other Important Items

Complete documentation from the very beginning will help you considerably when it’s time to apply for loan forgiveness.

  • Document every dollar spent with the proceeds of the loan and provide documentation to the lender at the end of the eight weeks. It is considered fraudulent if loan proceeds are spent on anything other than approved expenses.
  • As part of the PPP, the CARES Act established a Special Inspector General for Pandemic Recovery (SIGPR), with broad powers to audit and investigate businesses taking loans under the program.
  • Monitor and categorize spending over the next eight or twenty-four weeks

Per the enactment of the PPPFA, at least 60% of the loan proceeds need to be used for covered payroll related expenses and up to a maximum of 40% allowable on the specific operational expenses discussed below.

Documentation Expectations

Know what documentation your bank will require after eight weeks to substantiate the loan forgiveness. Ask your banker now so you can start on the correct path from the beginning.

Documents must be retained for at least six years.

Page 10 of the loan forgiveness application outlines “Documents that Each Borrower Must Submit with its PPP Loan Forgiveness Application”

Page-10-3245-0407-SBA-Form-3508-PPP-Forgiveness-Application

Current guidance states a 10 month deadline from the final day of the covered period.

With the Cares Act enhanced unemployment benefit provision, many employees are refusing to come back to work when offered. With the employee refusing to come back to work, many business are concerned that the PPP loan forgiveness may be limited.

Recent clarification was issued by the US Treasury (question #40) addressing this exact concern. Please read below:

Question #40:

Question:
Will a borrower’s PPP loan forgiveness amount (pursuant to section 1106 of the CARES Act and SBA’s implementing rules and guidance) be reduced if the borrower laid off an employee, offered to rehire the same employee, but the employee declined the offer?

Answer:
No. As an exercise of the Administrator’s and the Secretary’s authority under Section 1106(d)(6) of the CARES Act to prescribe regulations granting de minimis exemptions from the Act’s limits on loan forgiveness, SBA and Treasury intend to issue an interim final rule excluding laid-off employees whom the borrower offered to rehire (for the same salary/wages and same number of hours) from the CARES Act’s loan forgiveness reduction calculation.

The interim final rule will specify that, to qualify for this exception, the borrower must have made a good faith, written offer of rehire, and the employee’s rejection of that offer must be documented by the borrower.

Employees and employers should be aware that employees who reject offers of re-employment may forfeit eligibility for continued unemployment compensation.

Question #40 of the PPP FAQ issues by the US Treasury Issued May 6, 2020

What does this tell us?

We learn a few very helpful things from this clarification.

Employee Reinstatement Letter Template
  1. PPP Loan forgiveness amounts will not be reduced is an employee refuses to come back to work if the following steps are follows:
    1. The offer is extended in writing. Download the Editable Reinstatement Letter Template
    2. The offer is for the same salary/wages and hours as listed in the loan application
    3. The employer properly documents the employee’s rejection.
  2. Employees who reject the offer to return to work MAY also be forfeiting future eligibility to receive unemployment benefits. Thus, employees who refuse to come back to work may not further adversely affect employer SUI account rate once the re-employment offer is rejected and if the employees unemployment claim is denied by the SUI office.

It is important to note, the US Treasury does not oversee or set policy for state unemployment insurance (SUI) administration. SUI offices may operate differently from state to state. However, it is important for employers to properly document and provide information to the SUI offices to potentially protect their own company’s SUI rate from employees who claim and also REFUSE to return work.

The Treasury Department announced this week that PPP borrowers with less than $2 million in loans are automatically deemed to have made the financial-necessity certification on the loan application in good faith. Treasury also somewhat softened its rhetoric towards those businesses that have borrowed more than $2 million, noting that while they will not automatically be deemed to have made the certification like the under $2m loans, they can show an “adequate basis” for making the certification under prior SBA guidance based on their individual facts and circumstances.

The announcements were issued via FAQ No. 46

You may be required to pay back a portion of the loan, including interest. Interest will accrue on the PPPL from day one, even though you will not have to make any payments for six months following the date of disbursement. The interest will only be forgiven on the amount related to the principal forgiven.

Disclaimer
AdvanStaff HR does not give professional tax advice. All situations are different,
please contact your CPA or Banker for questions regarding SBA loans or tax-related questions.

Clarification on this question was provided by the IRS (read Notice 2020-32) on Thursday on 4/30/2020.

According to the SBA: Loan Forgiveness amounts ARE NOT taxable as business income and do not have to be repaid. HOWEVER, the IRS has clarified that payroll costs, rent, and utilities covered by the PPP loan forgiveness which are normally tax deductible, will not be tax deductible either.

“The money coming in the PPP is not taxable. So if the money that’s coming is not taxable, you can’t double dip,” Mnuchin said. “You can’t say you’re going to get deductions for workers that you didn’t pay for.”

Treasury Secretary Steven Mnuchin 

The forgiveness amount is not taxable BUT the covered expenses are not deductible.

In short:

  • PPP Loan Forgiveness – not taxable as business income
    • The loan forgiveness amount covered expenses (i.e. payroll, rent, utilities) are are also not deductible
    • Loan forgiveness does not need to be repaid
  • PPP Loan – not taxable as business income
    • Interest rate is 1% annually
    • Must be repaid in two years

Popular articles:

If you received an EIDL loan and you used the proceeds for payroll costs, your PPP loan must be used to refinance your EIDL loan and proceeds from any cash grant received up to $10,000 on the EIDL loan will be deducted from the loan forgiveness portion amount on the PPL.

The PPPFA expanded the employer side tax 6.2% Social Security Tax guidelines to allow employers with PPP loans to participate in this tax DEFERRAL program. The deferred taxes must be paid 50% by ear end 2021, and 50% by year end 2022.

If you want to participate in this program, please contact your payroll processor. You will be connected with our payroll tax department.

AdvanStaff is here to help and we continue to be your champion and guide through these challenging times!

If, in the unfortunate event, your contract would end with AdvanStaff (for any reason), we reserve the right to assess a reasonable charge for any support provided beyond the last date of your contract with us.