Tuesday, June 2nd, 2020, ADKF, CPAs hosted part II of a Live Webinar over Paycheck Protection Program (PPP) Loan Forgiveness. You will find below, a list of the most frequently asked questions from the webinar. Click on the question you’re interested in to find the answer.
Disclaimer: ADKF is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information in this site is provided “as is”, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information.
QUESTIONS & ANSWERS
Can more than 75% of the PPP loan be spent on payroll
Yes, all of the PPP funds can be spent on payroll
We’re projecting that we will have funds left over once the covered period ends. How can we use up these funds before the covered period ends?
You can put the left over amounts as a bonus, cash payout of unused vacation and/or sick time. Any cash compensation paid during the covered period is eligible.
How do payroll costs "paid or incurred" relate to the beginning of the covered period date? For example, we were funded 4/15, but payroll was run on 4/14.
Paychecks distributed or ACH credit transactions originated on or after the loan origination date are includable for the covered period. If the paychecks were distributed on 4/15, they can be included in the covered period. If you do not wish to include them, and the ACH credit transaction was originated on 4/14, you can choose to exclude them.
We received funding on 5/11 and pay biweekly. Our next pay date was 5/22 for the period 5/3 – 5/16. If we are using the alternate payroll covered period, should the 5/22 payment be included?
The alternative payroll covered period begins on the first day of the first pay period following the funding date. In this case, the alternative payroll covered period will run from 5/17 – 7/11. Payroll costs paid or incurred during this period are eligible for forgiveness including the 5/22 payment.
My 1st quarter TWC payment was paid during the covered period. Can I include that as a forgiveable payroll cost? How about the TWC payment due 7/31 for 2nd quarter? Most of those taxes were incurred during the covered period.
Regarding the 1st quarter TWC payment, yes, since these were paid during the covered period, they can be included in the forgiveness calculation. Regarding the 2nd quarter TWC payment, the amounts attributable to the covered period can be included in the forgiveness calculation.
Is a Semi-Monthly (twice a month) pay period eligible for the alternative covered payroll period?
No, borrowers that pay biweekly and more frequent can use the alternative payroll covered period.
What is the process for handling the semi-monthly payroll calculation for that part of 4th payroll period that extends past the eligible payroll period of 56 days?
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. Otherwise, payroll costs must be paid during the Covered Period (or Alternative Payroll Covered Period)
If the borrower received a EIDL grant of $10,000, does that automatically leave 10k balance on the PPP loan if all other PPP is forgiven?
Yes, the SBA will reduce the forgiveness amount by the amount of EIDL grant received.
Do cell phone employee reimbursements qualify as utilities?
There is no specific guidance other than utilities that were in service before 2/15/20 are eligible. You will need to be able to provide documentation supporting service existed before that date.
How should the PPP funding and subsequent forgiveness be reported on the Financial statements?
When funded, cash will be increased by the amount of the funds, and a liability will be incurred. The amount forgiven will reduce the liability and will be reported as other income.
When counting FTEs during the reference or covered period, is it based on pay period dates or pay dates.
This should be computed based on the pay date. If the reference period chosen is 1/1/20 – 2/29/20, and the first pay date in that period was 1/2/20, FTEs for that pay period will be included in the reference period’s average. For wages incurred but paid after the covered period ends that are included in the forgiveness calculation, you will also need to include FTEs for that period.
The PPP Forgiveness Application says to list employees on Table II who ‘received compensation from the borrower at an annualized rate of more than $100,000 for any pay period in 2019’ – Does that mean annual salary of over $100k -or- compensation of over $100k in a PAY PERIOD?
According to current guidance, employees who received annualized salaries of greater than $100k in any pay period should be included on Table II. A reduction in their FTE will not reduce the forgivable amount.
Do you have any official guidance from the SBA about loan forgiveness?
How do you calculate the FTE of a salary person whose hours are not tracked such as an adjunct faculty member paid a set amount per semester?
You can estimate how many hours they work per week. You can also choose to use the simplified method for calculating FTEs. If the employee works on average greater than 40 hours per week, they are assigned an FTE of 1. If they work on average less than 40 hours per week, the are assigned an FTE of .5. If the simplified method is used for one employee, it must be used for all.
If we had Employees who were off due to non-work or work related injuries, do we have to reduce our FTE for that period?
No, employees that request a reduced work schedule during the covered period will not reduce the FTE amount. Please keep any documentation regarding these circumstances.
Can I have an FTE reduction and salary/hourly wage reduction on the same employee?
No. Start with calculating FTE reductions. If you experienced an FTE reduction for an employee, you do not need to determine if that employee had a salary/hourly wage reduction.
Is loan interest on loans between related companies forgiveable if the loans are for the purchase of real property?
If a mortgage obligation between the related companies existed prior to 2/15/20, the interest is eligible for forgiveness.
We have 3 different payroll schedules (weekly, biweekly and monthly). Which box do we mark on the forgivenss application?
We recommend clarifying with your lender but checking all boxes relevant would likely be permissible.
On 1st page of the application, is number of employees FTE or total headcount?
This would be total employees (head count.)
Owner compensation is limited by the lesser of an annual salary of $100k or their 2019 compensation, each prorated for the covered period. Does this limitation apply to family members?
There is no specific guidance, but Texas community propery law may give your spouse ownership.
Does company paid premiums for owners health insurance qualify?
Not for self-employed individulas, general partners, and Schedule C Filers. Other owners insurance premiums paid by the business do qualify.
Can we include per diem paid for meals? If so, is it included in the payroll figure?
If it reported as payroll to the employee and will be reported on their W2, yes it would qualify. Otherwise, it would not qualify.
We have common costs of our building charged in an amount in excess of our monthly rent. Would it be appropiate to include the common costs in the monthly rent?
We may need to review your specific situation. It depends on if those amounts could potentially be classified as rent or possibly utilities.
If we owed April rent, received the PPP loan in May and paid the rent after the PPP funds were received, is the payment includable in the forgiveness calculation?
Yes, non-payroll costs paid during the covered period can be included in the forgiveness calculation as long as service/obligation existed prior to 2/15/20. Also, amounts incurred at the end of the covered period but paid after the covered period has ended, are includable.
Can I include our payments to Canon Financial for leased copiers that have been in place for years?
Yes, rent includes both real and personal property. Personal propery includes the rent of vehicles and equipment. The lease must have been in place prior to 2/15/20.
Are business rents paid to Owners allowed as a non-payroll cost?
If a lease agreement existed prior to 2/15/20, the rent is includable in the forgiveness calculation.
How are payroll costs computed for sole proprietors?
Owner compensation is equal to 2019’s Schedule C, line 31 amount prorated for the covered period. Also, payroll costs paid for employees, if any, are includable in the forgiveness calculation.
How do you account for payroll costs during the covered period? PPP covers Gross payroll; however, when recording the cash transactions, it is net of taxes, health insurance, and retirement withheld. Cash payment of payroll taxes, health insurance and retirement include both the employer and employee portions.
When computing strickly on a cash-flow basis, the employees’ net pay, and the full payment for health insurance, and retirement benefits (both employee and employer portion) will reduce available PPP funds. For the payroll taxes paid, only the employees’ payroll taxes withheld will reduce available PPP funds.
We paid some of our payroll and non-payroll costs from another account instead of our PPP fund account. Can we reimburse our other account with the PPP funds?
Yes, you can.
What does "transportation costs" include under utilities? If we have a fleet of vehicles used to conduct business, can we include the fuel used?
Transportation utilities are generally charged by a city for roads and public transportation and are included in their monthly utility bill. This does not include fuel for vehicles.
Under health insurance plans for calculating payroll cost, are other plans included such as vision, dental, disability, life?
There is no specific guidance, but all but life insurance are for medical benefits and are believed to be includable. Life insurance is a death benefit and may not be includable.