Optimizing PPP Forgiveness

[Stormbringer]

My two businesses are about to receive their PPP funds, which has me thinking about the forgiveness aspect of it. PPP isn't a grant, it is a two-year loan @ 1% interest. Some, all, or none of it may be forgiven after 8 weeks. I'm starting this thread so people can discuss strategies for maximizing loan forgiveness.

The proceeds for the PPP loan can be used for payroll costs, group health benefits, mortgage interest, rent, utilities, other interest, refinancing an EIDL loan. At least 75% of the money needs to be used for payroll.

Some of the questions I'm thinking about include:

1. When precisely does the 8 week period begin? When the loan is approved? When the funds are received?
2. What constitutes "utilities"? There are the obvious ones like electricity and water, but what about phone and Internet? If phone service counts, does wireless? What if your phone bill includes monthly payments for the equipment?
3. Utility bills and other expenses aren't going to line up perfectly with the 8-week window, so any bill paid may include a period of time outside of that time frame. Is forgiveness based on an accrual calculation? Or is it a cash basis? If a cash-basis, can bill payments be deferred or pulled forward such that it happens in the time window and can be forgiven?
4. If there are excess funds after payroll and other allowed costs, can the remainder be used to pay bonuses or add additional employees? For example, if we receive $200K and it looks like we're only going to spend $180K, can we dole out the remaining $20K by giving each employee a bonus at some point during the 8-week window?
5. Can retirement contributions be pulled forward? If we make quarterly or annual contributions to retirement, can the the timing of those payments be adjusted to land within the 8-week window?
6. Does "group health benefits" strictly mean just the premium paid to the insurance company for a group plan? Can it include employer contributions to an HSA? Or reimbursement of premiums paid by employees under a health reimbursement arrangement?
7. With regards to rent, what if the property is rented from an entity owned by the same controlled group of owners?
8. Other than the $100K limit on compensation, are there any prohibitions on the business owner participating in payroll or benefits? If there are excess funds, what is to stop the owner from giving themselves a pay increase, subject to the limit?

[bbqguru]

I've had several of the same questions and here are the answers I've received from our banker and our CPA (top 10 firm).

1. The day your loan is funded. You get 56 days from that date for your 8 week window.

2. Utilities we were told are gas, water, sewer, electric, phone, internet, and cellular. No guidance on device payments, but we're going to include the entire billed amount and let them worry about it.

3. It is expenses paid during the 56 day window, not incurred. You cannot however prepay anything. Our window ends June 2 so we are going to include group health that is EFT on 6/1, etc...

4. Nothing, however we were advised not to go above the 100k pro rata limit (1923.08/week * 8 weeks) including their current salary.

5. We make our contributions monthly and were told include the months that were paid during the window just to be on the safe side. For example, our window ends June 2, so we have to make sure and have the funds paid for May by 6/2.

6. No real answer from anyone I've asked. We're operating under the assumption of group health only.

7. We're in that situation and we were told ownership doesn't matter as long as there is a verifiable lease/rental agreement in place prior to February 15, 2020 and it is reasonable for the market you're in.

8. Our ownership is W2 and we were told nothing to stop us from taking a salary increase. It just can't be more than the 100k pro rata limit.

Like everything, we've been asking (and getting answers) via email, but realize it call all change since there isn't any official guidance or rules published yet. We aren't going to have any issue meeting the reimbursement amount either way, but want to make sure we have more than enough options for them to choose from if it comes down to that.

[the11diesel]

Thanks for starting this thread, Stormbringer and your comments, bbqguru--both are helpful.

Another question I have is, how will the government confirm that a business used the money on payroll? Dollars are fungible. So, let's take a fairly extreme example and say that a company has average payroll of $10 thousand per month, and receives a loan from the government of $25 thousand (2.5x this amount). What if the company also has (pre-PPP) $100 thousand in its bank account. So, now, after the PPP proceeds, the company has $125 thousand. Even if the company spends $25 thousand on payroll, how can the company *prove* that it spent the $25 thousand received from the government on payroll, rather than the $25 thousand it already had in its bank account?

Perhaps I'm missing something. If so, if someone could clarify this point for me, I would greatly appreciate it.

-RJ

[anil686]

My understanding from my bank is the following:
a). they are providing the loan. They are not not given money from the government until the loan is forgiven. I.e. it is truly a bank loan until that point. they are collecting all the information and they have provided me a checklist for the following information monthly
- payroll summary report
- lease invoice and payment
- utility invoice and payment
- health insurance invoice and payment
- retirement plan contribution reports
- Form 941 quarterly tax report

At the end of 8 weeks - they are going to send in the documentation for loan forgiveness to the SBA and they expect the loan to be forgiven and they will be paid by the SBA.

The SBA running out of money in the program is an accounting thing - they have to approve the loans and the amounts. They have exhausted the amounts but that money does not leave the government yet - it leaves when the loans are forgiven. If they are not forgiven - it stays with the banks.

Just my understanding from our bank...

[MP123]

Another question I have is, how will the government confirm that a business used the money on payroll? Dollars are fungible. So, let's take a fairly extreme example and say that a company has average payroll of $10 thousand per month, and receives a loan from the government of $25 thousand (2.5x this amount). What if the company also has (pre-PPP) $100 thousand in its bank account. So, now, after the PPP proceeds, the company has $125 thousand. Even if the company spends $25 thousand on payroll, how can the company *prove* that it spent the $25 thousand received from the government on payroll, rather than the $25 thousand it already had in its bank account?

In this example you'd have to document that you spent at least $25k on payroll, likely with a combination of Federal payroll filings and payroll reports. Actually, you could spend $20k on payroll, and $5k on rent/utilities but lets not over complicate this. But if you spent only $10k then only $10k would be forgivable and you'd have to pay the rest of the loan back. I don't think it would matter which account you actually paid from since (as you point out) dollars are fungible.

At least that's the way it appears to me at this point. The SBA hasn't finalized anything yet and it could be changed.

[the11diesel]

Thanks, MP123. That is my interpretation as well. I'm surprised there isn't some sort of means test.

Another question I have is, how will the government confirm that a business used the money on payroll? Dollars are fungible. So, let's take a fairly extreme example and say that a company has average payroll of $10 thousand per month, and receives a loan from the government of $25 thousand (2.5x this amount). What if the company also has (pre-PPP) $100 thousand in its bank account. So, now, after the PPP proceeds, the company has $125 thousand. Even if the company spends $25 thousand on payroll, how can the company *prove* that it spent the $25 thousand received from the government on payroll, rather than the $25 thousand it already had in its bank account?

In this example you'd have to document that you spent at least $25k on payroll, likely with a combination of Federal payroll filings and payroll reports. Actually, you could spend $20k on payroll, and $5k on rent/utilities but lets not over complicate this. But if you spent only $10k then only $10k would be forgivable and you'd have to pay the rest of the loan back. I don't think it would matter which account you actually paid from since (as you point out) dollars are fungible.

At least that's the way it appears to me at this point. The SBA hasn't finalized anything yet and it could be changed.

[bbqguru]

Another question I have is, how will the government confirm that a business used the money on payroll? Dollars are fungible. So, let's take a fairly extreme example and say that a company has average payroll of $10 thousand per month, and receives a loan from the government of $25 thousand (2.5x this amount). What if the company also has (pre-PPP) $100 thousand in its bank account. So, now, after the PPP proceeds, the company has $125 thousand. Even if the company spends $25 thousand on payroll, how can the company *prove* that it spent the $25 thousand received from the government on payroll, rather than the $25 thousand it already had in its bank account?

In this example you'd have to document that you spent at least $25k on payroll, likely with a combination of Federal payroll filings and payroll reports. Actually, you could spend $20k on payroll, and $5k on rent/utilities but lets not over complicate this. But if you spent only $10k then only $10k would be forgivable and you'd have to pay the rest of the loan back. I don't think it would matter which account you actually paid from since (as you point out) dollars are fungible.

At least that's the way it appears to me at this point. The SBA hasn't finalized anything yet and it could be changed.

I would agree with this. We've been told that we'll have to provide payroll reports, retirement contribution reports, canceled checks, etc... They don't care how much you had in the bank or what your P&L looked like before the loan, just that the money you received was spent appropriately.

Our funds are in their own checking account to keep things easier to track. What we're doing when it comes to payroll is transferring from our corporate account into the PPP account any payroll funds that aren't reimbursable, that way we keep better track of the remaining funds and it shows to whomever is looking that we're following the rules.

If our payroll this week (and I'making up numbers) is $50,000 and $15,000 is non-reimbursable, we're transferring $15,000 into the account to cover the part the government isn't.

[athan]

We just received documents to e—sign our PPP loan. We will be closed for a few more weeks minimum and my employees are on unemployment. I would rather not accept this PPP loan until I open back up.

Does anybody know how long I have before I need to e-sign?

I’m trying to keep the 8 week clock from starting too soon.

[Almond]

About 8 weeks forgiveness starting when you receive the funds.

Depending on when you receive the funds and on what date you pay payroll — some companies might get to deduct for forgiveness 2 or 4 payrolls (depending on if you pay monthly or biweekly) and others 1 or 3.

Unless you bring payroll forward, or the 8 week period has some flexibility — company A will be able to have more of the loan forgiven than company B based on when they got the funds. I can’t believe it will work that way, so interested what other stuff are hearing.

[SouthernFIRE]

Regarding documentation, our banker recommended segregating the PPP funds in a separate account and directly paying reimbursable expenses from that account. When it comes time to prove the money was spent on payroll/utilities/rent, the detail is all contained in the bank statement. As someone pointed out above, money is fungible so if you commingle the PPP funds in a general operating account, it becomes impossible to show that the PPP funds were used for reimbursable expenses as opposed to other business expenses. FWIW.

[Kookaburra]

Great post!

[bbqguru]

We just received documents to e—sign our PPP loan. We will be closed for a few more weeks minimum and my employees are on unemployment. I would rather not accept this PPP loan until I open back up.

Does anybody know how long I have before I need to e-sign?

I’m trying to keep the 8 week clock from starting too soon.

I think you have 10 days to fund the loan from approval/signatures. I'd double check with the bank.

[cusetownusa]

Regarding documentation, our banker recommended segregating the PPP funds in a separate account and directly paying reimbursable expenses from that account. When it comes time to prove the money was spent on payroll/utilities/rent, the detail is all contained in the bank statement. As someone pointed out above, money is fungible so if you commingle the PPP funds in a general operating account, it becomes impossible to show that the PPP funds were used for reimbursable expenses as opposed to other business expenses. FWIW.

Hmm...anyone else doing this? Thought we just had to show proof of all qualifying expenses during the 8 week window? Money is fungible so not sure why we would need to move money to a separate account to pay out all of the qualifying expenses.

[cusetownusa]

Also, thanks for starting this post...I don't have much to add but will be following.

[kmurp]

Our office has no mortgage, but has condo fees. Would that come under the heading of rent?

[kmurp]

I've had several of the same questions and here are the answers I've received from our banker and our CPA (top 10 firm).

1. The day your loan is funded. You get 56 days from that date for your 8 week window.

2. Utilities we were told are gas, water, sewer, electric, phone, internet, and cellular. No guidance on device payments, but we're going to include the entire billed amount and let them worry about it.

3. It is expenses paid during the 56 day window, not incurred. You cannot however prepay anything. Our window ends June 2 so we are going to include group health that is EFT on 6/1, etc...

4. Nothing, however we were advised not to go above the 100k pro rata limit (1923.08/week * 8 weeks) including their current salary.

5. We make our contributions monthly and were told include the months that were paid during the window just to be on the safe side. For example, our window ends June 2, so we have to make sure and have the funds paid for May by 6/2.

6. No real answer from anyone I've asked. We're operating under the assumption of group health only.

7. We're in that situation and we were told ownership doesn't matter as long as there is a verifiable lease/rental agreement in place prior to February 15, 2020 and it is reasonable for the market you're in.

8. Our ownership is W2 and we were told nothing to stop us from taking a salary increase. It just can't be more than the 100k pro rata limit.

Like everything, we've been asking (and getting answers) via email, but realize it call all change since there isn't any official guidance or rules published yet. We aren't going to have any issue meeting the reimbursement amount either way, but want to make sure we have more than enough options for them to choose from if it comes down to that.

We were hoping or had read that benefits like retirement contributions and health insurance were over and above the 100k limit. Any other views on this out there?

[Luckywon]

We were hoping or had read that benefits like retirement contributions and health insurance were over and above the 100k limit. Any other views on this out there?

That's my understanding too.

Based on this from the U.S. Treasury Department, it seems fairly explicit that retirement contributions and group health care benefits are not considered within the $100,000 limitation.

https://home.treasury.gov/system/files/ ... -Sheet.pdf

see within this document this section:

What counts as payroll costs? Payroll costs include:
 Salary, wages, commissions, or tips (capped at $100,000 on an annualized basis for each
employee);
 Employee benefits including costs for vacation, parental, family, medical, or sick leave;
allowance for separation or dismissal; payments required for the provisions of group
health care benefits including insurance premiums; and payment of any retirement
benefit;
 State and local taxes assessed on compensation; and
 For a sole proprietor or independent contractor: wages, commissions, income, or net
earnings from self-employment, capped at $100,000 on an annualized basis for each
employee.

[bbqguru]

We were hoping or had read that benefits like retirement contributions and health insurance were over and above the 100k limit. Any other views on this out there?

That's my understanding too.

Based on this from the U.S. Treasury Department, it seems fairly explicit that retirement contributions and group health care benefits are not considered within the $100,000 limitation.

https://home.treasury.gov/system/files/ ... -Sheet.pdf

see within this document this section:

What counts as payroll costs? Payroll costs include:
 Salary, wages, commissions, or tips (capped at $100,000 on an annualized basis for each
employee);
 Employee benefits including costs for vacation, parental, family, medical, or sick leave;
allowance for separation or dismissal; payments required for the provisions of group
health care benefits including insurance premiums; and payment of any retirement
benefit;
 State and local taxes assessed on compensation; and
 For a sole proprietor or independent contractor: wages, commissions, income, or net
earnings from self-employment, capped at $100,000 on an annualized basis for each
employee.

That's our, our CPA, and bankers view as well. That the $100k limit is strictly wages. Not the other stuff.

[markfaix]

4. Nothing, however we were advised not to go above the 100k pro rata limit (1923.08/week * 8 weeks) including their current salary.

Can you clarify this? In determining the amount of the loan, payroll costs are capped at 100k per employee as you mentioned.

But for forgiveness, the US Treasury website doesn't mention the 100k cap in the 8 week period afterward:

From page 3 of this document
https://home.treasury.gov/system/files/ ... -Sheet.pdf

How much of my loan will be forgiven? You will owe money when your loan is due if you use
the loan amount for anything other than payroll costs, mortgage interest, rent, and utilities
payments over the 8 weeks after getting the loan. Due to likely high subscription, it is anticipated
that not more than 25% of the forgiven amount may be for non-payroll costs.
You will also owe money if you do not maintain your staff and payroll.
 Number of Staff: Your loan forgiveness will be reduced if you decrease your full-time
employee headcount.
 Level of Payroll: Your loan forgiveness will also be reduced if you decrease salaries and
wages by more than 25% for any employee that made less than $100,000 annualized in
2019.
 Re-Hiring: You have until June 30, 2020 to restore your full-time employment and
salary levels for any changes made between February 15, 2020 and April 26, 2020.

[Almond]

About 8 weeks forgiveness starting when you receive the funds.

Depending on when you receive the funds and on what date you pay payroll — some companies might get to deduct for forgiveness 2 or 4 payrolls (depending on if you pay monthly or biweekly) and others 1 or 3.

Unless you bring payroll forward, or the 8 week period has some flexibility — company A will be able to have more of the loan forgiven than company B based on when they got the funds. I can’t believe it will work that way, so interested what other stuff are hearing.

Anyone got thoughts on this. My bank and CPA thinks it is unlikely that some would be penalized because 8 weeks from funding does not include 8 weeks of payroll? said the treasury will be issuing guidelines on how forgiveness works

[bbqguru]

4. Nothing, however we were advised not to go above the 100k pro rata limit (1923.08/week * 8 weeks) including their current salary.

Can you clarify this? In determining the amount of the loan, payroll costs are capped at 100k per employee as you mentioned.

But for forgiveness, the US Treasury website doesn't mention the 100k cap in the 8 week period afterward:

From page 3 of this document
https://home.treasury.gov/system/files/ ... -Sheet.pdf

How much of my loan will be forgiven? You will owe money when your loan is due if you use
the loan amount for anything other than payroll costs, mortgage interest, rent, and utilities
payments over the 8 weeks after getting the loan. Due to likely high subscription, it is anticipated
that not more than 25% of the forgiven amount may be for non-payroll costs.
You will also owe money if you do not maintain your staff and payroll.
 Number of Staff: Your loan forgiveness will be reduced if you decrease your full-time
employee headcount.
 Level of Payroll: Your loan forgiveness will also be reduced if you decrease salaries and
wages by more than 25% for any employee that made less than $100,000 annualized in
2019.
 Re-Hiring: You have until June 30, 2020 to restore your full-time employment and
salary levels for any changes made between February 15, 2020 and April 26, 2020.

Page 1, first paragraph. It states that loan will be forgiven as long as proceeds are used to cover payroll costs.... It then states that payroll costs are capped at $100,000......

[bbqguru]

About 8 weeks forgiveness starting when you receive the funds.

Depending on when you receive the funds and on what date you pay payroll — some companies might get to deduct for forgiveness 2 or 4 payrolls (depending on if you pay monthly or biweekly) and others 1 or 3.

Unless you bring payroll forward, or the 8 week period has some flexibility — company A will be able to have more of the loan forgiven than company B based on when they got the funds. I can’t believe it will work that way, so interested what other stuff are hearing.

Anyone got thoughts on this. My bank and CPA thinks it is unlikely that some would be penalized because 8 weeks from funding does not include 8 weeks of payroll? said the treasury will be issuing guidelines on how forgiveness works

I'd think you'd have to process a short payroll in the time frame. The 56 days doesn't have any wiggle room from what I can tell and we've been told. Our last payroll in May is the 22nd. So if we wanted to capture the payroll that covered May 18-31 we would have to have a "special" payroll to get those dates paid before our time ran out.

Either way it is going to be a PIA, but in the long-run not a huge deal.

[theplayer11]

How would a 941 prove anything when it's for 3 months and forgiveness is 56 days? Also, agricultural entities are not required to file form 941.

[CrazyCatLady]

Regarding documentation, our banker recommended segregating the PPP funds in a separate account and directly paying reimbursable expenses from that account. When it comes time to prove the money was spent on payroll/utilities/rent, the detail is all contained in the bank statement. As someone pointed out above, money is fungible so if you commingle the PPP funds in a general operating account, it becomes impossible to show that the PPP funds were used for reimbursable expenses as opposed to other business expenses. FWIW.

Hmm...anyone else doing this? Thought we just had to show proof of all qualifying expenses during the 8 week window? Money is fungible so not sure why we would need to move money to a separate account to pay out all of the qualifying expenses.

Our bank recommended doing this as well, so we set up a separate account with just the PPP money. Don't know if it's required, but it certainly doesn't hurt, and wasn't difficult to do.

[theplayer11]

For those opening separate bank account just for PPP forgiveness. How are you going to handle FICA tax payments where the employer side is not forgivable? Split the payments up, employee side payment from new account, employer side from another? That makes things a little difficult, especially when you have software that spits out total FICA paymnet to send to IRS.

[bbqguru]

For those opening separate bank account just for PPP forgiveness. How are you going to handle FICA tax payments where the employer side is not forgivable? Split the payments up, employee side payment from new account, employer side from another? That makes things a little difficult, especially when you have software that spits out total FICA paymnet to send to IRS.

We're transferring the forgivable portion to our account that pays the entire amount. That way there's a paper trail for the transfer, and the amount is verified by the payroll reports and EFTPS confirmations.

[theplayer11]

For those opening separate bank account just for PPP forgiveness. How are you going to handle FICA tax payments where the employer side is not forgivable? Split the payments up, employee side payment from new account, employer side from another? That makes things a little difficult, especially when you have software that spits out total FICA paymnet to send to IRS.

We're transferring the forgivable portion to our account that pays the entire amount. That way there's a paper trail for the transfer, and the amount is verified by the payroll reports and EFTPS confirmations.

that makes sense, will do the same..thanks

[playtothebeat]

We just received documents to e—sign our PPP loan. We will be closed for a few more weeks minimum and my employees are on unemployment. I would rather not accept this PPP loan until I open back up.

Does anybody know how long I have before I need to e-sign?

I’m trying to keep the 8 week clock from starting too soon.

The clock starts the day it funds, and the funding has to be within 10 days of approval. But that aside, i'm afraid you (and many others, unfortuantely) are missing the "point" of the PPP program. It's not to help businesses stay afloat. It's to help businesses pay wages, so that those employees can lessen the burden on state unemployment systems (and of course provide funds to pay utilities and rent while the business is not operational at full or any capacity). There are a lot of articles in the press about restaurant owners etc saying they'd rather get the funds when the business is ready to reopen given that volume is down right now, and that is not at all the intent of the program.

[lgb]

So if the amount approved (Let's use $90,000) was based on employees salary and salary plus an end of year bonus normally paid, and we have been approved for the example $90,000.

Will the 'bonus' amount normally that we pay at towards the end of the year be able to be just included in this 8 week period, or will we have to pay those bonuses 'now' in order to be able to get what we were actually approved?

In other words - the payroll information provided originally when applying of course includes the salary and bonus information, but if what is allowed to be forgiven is whatever is shown during this 8 week period once the $90,000 is actually funded:
1. are we allowed to pay those bonuses now to employees to have it forgiven? or will that look odd?
2. Do those bonuses have to be paid now to employees to have it forgiven?

Or does it just mean that we can't really get the entire amount we were approved for ($90,000 as example) based on our prior salary reports (that included the prior historical normal bonus)?

For some employees they forego having a higher salary to see how things go during the year based on goals and efforts, and a large portion of their compensation/salary would include that bonus paid out later in the year.

Help me understand.

[athan]

We just received documents to e—sign our PPP loan. We will be closed for a few more weeks minimum and my employees are on unemployment. I would rather not accept this PPP loan until I open back up.

Does anybody know how long I have before I need to e-sign?

I’m trying to keep the 8 week clock from starting too soon.

The clock starts the day it funds, and the funding has to be within 10 days of approval. But that aside, i'm afraid you (and many others, unfortuantely) are missing the "point" of the PPP program. It's not to help businesses stay afloat. It's to help businesses pay wages, so that those employees can lessen the burden on state unemployment systems (and of course provide funds to pay utilities and rent while the business is not operational at full or any capacity). There are a lot of articles in the press about restaurant owners etc saying they'd rather get the funds when the business is ready to reopen given that volume is down right now, and that is not at all the intent of the program.

The intent of the program is to hire your employees back by June 30th. I should not be penalized because I get my loan before another small business. I am simply trying to hold off on the funds hitting my account until the State says I can open my business. I am planning on rehiring my full staff the day I open. Also, I have not taken any salary or distributions since we closed, and probably will not be able to for a long time. And if you think it is not to help the business stay afloat, you are obviously missing the point. If the business does not stay afloat, the employees lose their jobs permanently.

[Luckywon]

We're transferring the forgivable portion to our account that pays the entire amount. That way there's a paper trail for the transfer, and the amount is verified by the payroll reports and EFTPS confirmations.

I'm thinking of opening up an account for my PPP funds as well. I wanted to be sure I absolutely understand what you're saying. Do you mean you're transferring the non forgivable portion to the account that pays the entire amount?

[bbqguru]

We're transferring the forgivable portion to our account that pays the entire amount. That way there's a paper trail for the transfer, and the amount is verified by the payroll reports and EFTPS confirmations.

I'm thinking of opening up an account for my PPP funds as well. I wanted to be sure I absolutely understand what you're saying. Do you mean you're transferring the non forgivable portion to the account that pays the entire amount?

Correct.

We have 2 main bank accounts. One that is for daily operations and another that is strictly payroll and the related expenses (fed & state taxes, retirement contributions, etc...). I've got a spreadsheet that our accountant approved to keep track of the expenses. I make one for each pay period based on our figures and keep it in a folder. I know the reimbursement categories may change based on new rulings, but this gets us close enough that we can survive. If we leave some on the table or include too much, it'll all even out because we'll have more than our loan amount in payroll and expenses.

For example, I have a payday this Friday (4/24) and the total needed to cover everything is $50,000. I enter that amount and how it breaks down. Then whatever amount is "non-reimbursed", I do an account transfer to the payroll account for that amount. The biggest thing I'm having to stress to our payroll company is that the EFTPS, retirement, etc... must be paid within the window--that we can't use the normally scheduled payment date. (In our case, we have to have May's contributions and taxes sent by June 2).

You are allowed to include state unemployment in your forgiveness amount. We don't currently have to pay, so I left it out of our sheet.

[Luckywon]

We're transferring the forgivable portion to our account that pays the entire amount. That way there's a paper trail for the transfer, and the amount is verified by the payroll reports and EFTPS confirmations.

I'm thinking of opening up an account for my PPP funds as well. I wanted to be sure I absolutely understand what you're saying. Do you mean you're transferring the non forgivable portion to the account that pays the entire amount?

Correct.

We have 2 main bank accounts. One that is for daily operations and another that is strictly payroll and the related expenses (fed & state taxes, retirement contributions, etc...). I've got a spreadsheet that our accountant approved to keep track of the expenses. I make one for each pay period based on our figures and keep it in a folder. I know the reimbursement categories may change based on new rulings, but this gets us close enough that we can survive. If we leave some on the table or include too much, it'll all even out because we'll have more than our loan amount in payroll and expenses.

For example, if have a payday this Friday (4/24) and the total needed to cover everything is $50,000. I enter that amount and how it breaks down. Then whatever amount is "non-reimbursed", I do an account transfer to the payroll account for that amount. The biggest thing I'm having to stress to our payroll company is that the EFTPS, retirement, etc... must be paid within the window--that we can't use the normally scheduled payment date. (In our case, we have to have May's contributions and taxes sent by June 2).

You are allowed to include state unemployment in your forgiveness amount. We don't currently have to pay, so I left it out of our sheet.

Very helpful, I think I will do the same. Thank you so much!

I plan to also make an employee deferral contribution to my 401k from the PPP expenses account, my understanding is those are allowable.

[cusetownusa]

We're transferring the forgivable portion to our account that pays the entire amount. That way there's a paper trail for the transfer, and the amount is verified by the payroll reports and EFTPS confirmations.

I'm thinking of opening up an account for my PPP funds as well. I wanted to be sure I absolutely understand what you're saying. Do you mean you're transferring the non forgivable portion to the account that pays the entire amount?

Correct.

We have 2 main bank accounts. One that is for daily operations and another that is strictly payroll and the related expenses (fed & state taxes, retirement contributions, etc...). I've got a spreadsheet that our accountant approved to keep track of the expenses. I make one for each pay period based on our figures and keep it in a folder. I know the reimbursement categories may change based on new rulings, but this gets us close enough that we can survive. If we leave some on the table or include too much, it'll all even out because we'll have more than our loan amount in payroll and expenses.

For example, I have a payday this Friday (4/24) and the total needed to cover everything is $50,000. I enter that amount and how it breaks down. Then whatever amount is "non-reimbursed", I do an account transfer to the payroll account for that amount. The biggest thing I'm having to stress to our payroll company is that the EFTPS, retirement, etc... must be paid within the window--that we can't use the normally scheduled payment date. (In our case, we have to have May's contributions and taxes sent by June 2).

You are allowed to include state unemployment in your forgiveness amount. We don't currently have to pay, so I left it out of our sheet.

Thanks....Im going to create an excel spreadsheet similar to this to track everyone.

Question...why are you including the employee FICA and not the employer FICA as eligible for reimbursement?

Also, is there a limit to 401k match reimbursement? We provide a profit sharing match and I am wondering if we should do it during this 56 day window to help maximize the reimbursement.

Also, we typically do an end of year profit sharing bonus and wonder if I should do some or all of it during this 56 day window?

[bbqguru]

We're transferring the forgivable portion to our account that pays the entire amount. That way there's a paper trail for the transfer, and the amount is verified by the payroll reports and EFTPS confirmations.

I'm thinking of opening up an account for my PPP funds as well. I wanted to be sure I absolutely understand what you're saying. Do you mean you're transferring the non forgivable portion to the account that pays the entire amount?

Correct.

We have 2 main bank accounts. One that is for daily operations and another that is strictly payroll and the related expenses (fed & state taxes, retirement contributions, etc...). I've got a spreadsheet that our accountant approved to keep track of the expenses. I make one for each pay period based on our figures and keep it in a folder. I know the reimbursement categories may change based on new rulings, but this gets us close enough that we can survive. If we leave some on the table or include too much, it'll all even out because we'll have more than our loan amount in payroll and expenses.

For example, I have a payday this Friday (4/24) and the total needed to cover everything is $50,000. I enter that amount and how it breaks down. Then whatever amount is "non-reimbursed", I do an account transfer to the payroll account for that amount. The biggest thing I'm having to stress to our payroll company is that the EFTPS, retirement, etc... must be paid within the window--that we can't use the normally scheduled payment date. (In our case, we have to have May's contributions and taxes sent by June 2).

You are allowed to include state unemployment in your forgiveness amount. We don't currently have to pay, so I left it out of our sheet.

Thanks....Im going to create an excel spreadsheet similar to this to track everyone.

Question...why are you including the employee FICA and not the employer FICA as eligible for reimbursement?

Also, is there a limit to 401k match reimbursement? We provide a profit sharing match and I am wondering if we should do it during this 56 day window to help maximize the reimbursement.

Also, we typically do an end of year profit sharing bonus and wonder if I should do some or all of it during this 56 day window?

The employER portion of FICA is excluded per the SBA's definition of payroll costs. The only employER taxes you can include are state and local unemployment premiums.

I would assume the limit to 401k would be whatever the standard match is for the employee's salary. We match 3% so we can't give anymore than that. As for profit sharing, I would think that you would have to do the profit-sharing payment during the 56 day window in order to include it, but that is ultimately above my pay grade.

Our accountant told us to keep everything as normal appearing as we can. So if we always did bonuses in December, we couldn't move them up. He did mention that we could, however, give out hazard bonuses for working during the pandemic.

I also just read a report that said you could include payroll that was paid outside the 56 day window but incurred during the window. For example, if your 56 day window ran out on June 1, but your payroll was June 5 (for May 25 - June 5) . You could claim the the amount that was covered by May 25- June 1. I'm a bit hesitant to go along with that line of thinking until there is something official...

[Luckywon]

The employER portion of FICA is excluded per the SBA's definition of payroll costs. The only employER taxes you can include are state and local unemployment premiums.

I would assume the limit to 401k would be whatever the standard match is for the employee's salary. We match 3% so we can't give anymore than that. As for profit sharing, I would think that you would have to do the profit-sharing payment during the 56 day window in order to include it, but that is ultimately above my pay grade.

Our accountant told us to keep everything as normal appearing as we can. So if we always did bonuses in December, we couldn't move them up. He did mention that we could, however, give out hazard bonuses for working during the pandemic.

I also just read a report that said you could include payroll that was paid outside the 56 day window but incurred during the window. For example, if your 56 day window ran out on June 1, but your payroll was June 5 (for May 25 - June 5) . You could claim the the amount that was covered by May 25- June 1. I'm a bit hesitant to go along with that line of thinking until there is something official...

It seems to me that to the extent possible, one should maximize income paid from the PPP loan amount, since it appears such income will not be subject to federal income taxes (in California so far it appears it will be subject to state income taxes). To the extent employee FICA, pension contributions and health plan contributions are made (which are deductible anyway), one reduces a unique opportunity to receive income free of federal income tax.

[bbqguru]

The employER portion of FICA is excluded per the SBA's definition of payroll costs. The only employER taxes you can include are state and local unemployment premiums.

I would assume the limit to 401k would be whatever the standard match is for the employee's salary. We match 3% so we can't give anymore than that. As for profit sharing, I would think that you would have to do the profit-sharing payment during the 56 day window in order to include it, but that is ultimately above my pay grade.

Our accountant told us to keep everything as normal appearing as we can. So if we always did bonuses in December, we couldn't move them up. He did mention that we could, however, give out hazard bonuses for working during the pandemic.

I also just read a report that said you could include payroll that was paid outside the 56 day window but incurred during the window. For example, if your 56 day window ran out on June 1, but your payroll was June 5 (for May 25 - June 5) . You could claim the the amount that was covered by May 25- June 1. I'm a bit hesitant to go along with that line of thinking until there is something official...

It seems to me that to the extent possible, one should maximize income paid from the PPP loan amount, since it appears such income will not be subject to federal income taxes (in California so far it appears it will be subject to state income taxes). To the extent employee FICA, pension contributions and health plan contributions are made (which are deductible anyway), one reduces a unique opportunity to receive income free of federal income tax.

100% agree. We'll have spent all of our money, and them some, within the 56 days. We're making sure to stay within the 15,386 wage limit over the 8 weeks, but we're giving hazard pay bonuses and different things to help our employees where we can.

It is truly a once in a lifetime (I hope) opportunity.

[Stormbringer]

Are there any issues with increasing headcount and using the PPP funds for the new positions?

[bbqguru]

Are there any issues with increasing headcount and using the PPP funds for the new positions?

You'd probably win an award for doing so. I think the intention is to make sure your payroll stays the same and worst and increases at best.

[MP123]

Are there any issues with increasing headcount and using the PPP funds for the new positions?

You'd probably win an award for doing so. I think the intention is to make sure your payroll stays the same and worst and increases at best.

Yes, I think that would be fine. As would giving your employees and yourself a raise (subject to $100k annualized limit).

You just can't reduce headcount or anyones pay more than 25% without some portion of the loan not being forgiven.

At least that's the way the bill is written and the way it appears now.

But my hunch is that it may be easier to get these things than to get them forgiven...

We should know more in about eight seven weeks.

[the11diesel]

Are there any issues with increasing headcount and using the PPP funds for the new positions?

You'd probably win an award for doing so. I think the intention is to make sure your payroll stays the same and worst and increases at best.

Yes, I think that would be fine. As would giving your employees and yourself a raise (subject to $100k annualized limit).

You just can't reduce headcount or anyones pay more than 25% without some portion of the loan not being forgiven.

At least that's the way the bill is written and the way it appears now.

But my hunch is that it may be easier to get these things than to get them forgiven...

We should know more in about eight seven weeks.

I agree. What it will actually take to have these amounts forgiven is the big question mark.

To that end, is there any guidance related to the *how* of requesting forgiveness? Treasury guidance has a Q&A for"What documentation will I be required to submit to my lender with my request for loan forgiveness?" However, I don't see guidance regarding the mechanics of how and when someone actually requests forgiveness.

For example, is the "request" just a letter sent to the financial institution that processed the loan?

Also, when should one be sending this? If I got PPP funds on Day 1, spent them all on eligible costs on Day 2, and sent the financial institution a letter request for forgiveness on Day 3, is that acceptable? If not, why wouldn't it be (i.e., it seems like that process would be complying with the letter of the law)?

-RJ

[tobyfries]

 For a sole proprietor or independent contractor: wages, commissions, income, or net
earnings from self-employment, capped at $100,000 on an annualized basis for each
employee.

So, how exactly does one generate a "Payroll Summary Report" if payroll is net earnings from self-employment with schedule C?

[tobyfries]

As per April 14 guidance https://home.treasury.gov/system/files/ ... -Loans.pdf

What documentation will I be required to submit to my lender with my request for loan
forgiveness?

In addition to the borrower certification required by Section 1106(e)(3) of the Act, to
substantiate your request for loan forgiveness, if you have employees, you should submit
Form 941 and state quarterly wage unemployment insurance tax reporting forms or
equivalent payroll processor records that best correspond to the covered period (with
evidence of any retirement and health insurance contributions). Whether or not you have
employees, you must submit evidence of business rent, business mortgage interest
payments on real or personal property, or business utility payments during the covered
period if you used loan proceeds for those purposes.

The 2019 Form 1040 Schedule C that was provided at the time of the PPP loan
application must be used to determine the amount of net profit allocated to the owner for
the eight-week covered period. The Administrator, in consultation with the Secretary,
determined that for purposes of loan forgiveness it is appropriate to require self-employed
individuals to rely on the 2019 Form 1040 Schedule C to determine the amount of net
profit allocated to the owner during the covered period for the reasons described in
Paragraph 1.d. above.

(emphasis is mine)

Any thoughts on this? Does that mean 2019 Schedule C will suffice for BOTH purposes of loan application AND forgiveness?

[Ricchan]

For those opening separate bank account just for PPP forgiveness. How are you going to handle FICA tax payments where the employer side is not forgivable? Split the payments up, employee side payment from new account, employer side from another? That makes things a little difficult, especially when you have software that spits out total FICA paymnet to send to IRS.

We're transferring the forgivable portion to our account that pays the entire amount. That way there's a paper trail for the transfer, and the amount is verified by the payroll reports and EFTPS confirmations.

That sounds like a good idea, and I'm looking to do the same. However, I'm wondering how to handle credit cards that are normally used for both utilities that would qualify for PPP forgiveness and other expenses that would not.

I suppose the easiest thing would be to stop using the credit card for utilities and instead use either direct bill pay or checks from the designated PPP checking account. Or would you continue using the credit card for utilities (and other expenses), and use the PPP account to pay the credit card bills, but then transfer extra money to the PPP account to cover the non-forgivable expenses?

[MP123]

As per April 14 guidance https://home.treasury.gov/system/files/ ... -Loans.pdf

What documentation will I be required to submit to my lender with my request for loan
forgiveness?

In addition to the borrower certification required by Section 1106(e)(3) of the Act, to
substantiate your request for loan forgiveness, if you have employees, you should submit
Form 941 and state quarterly wage unemployment insurance tax reporting forms or
equivalent payroll processor records that best correspond to the covered period (with
evidence of any retirement and health insurance contributions). Whether or not you have
employees, you must submit evidence of business rent, business mortgage interest
payments on real or personal property, or business utility payments during the covered
period if you used loan proceeds for those purposes.

The 2019 Form 1040 Schedule C that was provided at the time of the PPP loan
application must be used to determine the amount of net profit allocated to the owner for
the eight-week covered period. The Administrator, in consultation with the Secretary,
determined that for purposes of loan forgiveness it is appropriate to require self-employed
individuals to rely on the 2019 Form 1040 Schedule C to determine the amount of net
profit allocated to the owner during the covered period for the reasons described in
Paragraph 1.d. above.

(emphasis is mine)

Any thoughts on this? Does that mean 2019 Schedule C will suffice for BOTH purposes of loan application AND forgiveness?

I don't think there is any clear guidance yet about how Schedule C filers will qualify for forgiveness. Or 941/W2 filers either, for that matter.

But for you'd qualify for a loan amount based on your 2019 net profit from Schedule C.

Even 2020s Schedule C won't document that you spent it all in 8 weeks though, so I'm not sure what they'll need to look at to figure that out for a sole proprietor.

[Stormbringer]

What it will actually take to have these amounts forgiven is the big question mark.

I'm worried that receiving forgiveness is going to be much more difficult than anyone is expecting. The politics around it is going to be awful.

Just today the US Treasury issued guidance that disqualifies all publicly traded companies on the basis that they have access to capital through the markets. Senator Ron Johnson (WI) wrote a fairly ominous op-ed in the Wall Street Journal as well, warning that companies that didn't suffer a major loss of revenue need to be prepared to return a substantial portion of the PPP money they received. The backlash may just be getting started.

[bbqguru]

For those opening separate bank account just for PPP forgiveness. How are you going to handle FICA tax payments where the employer side is not forgivable? Split the payments up, employee side payment from new account, employer side from another? That makes things a little difficult, especially when you have software that spits out total FICA paymnet to send to IRS.

We're transferring the forgivable portion to our account that pays the entire amount. That way there's a paper trail for the transfer, and the amount is verified by the payroll reports and EFTPS confirmations.

That sounds like a good idea, and I'm looking to do the same. However, I'm wondering how to handle credit cards that are normally used for both utilities that would qualify for PPP forgiveness and other expenses that would not.

I suppose the easiest thing would be to stop using the credit card for utilities and instead use either direct bill pay or checks from the designated PPP checking account. Or would you continue using the credit card for utilities (and other expenses), and use the PPP account to pay the credit card bills, but then transfer extra money to the PPP account to cover the non-forgivable expenses?

We're not giving up the credit card rewards that easy! What we're doing is paying everything we can on our credit card then after the charge posts, make an immediate payment for the items we can claim for forgiveness. It all goes back to the paper trail and the 56 days. As long as you can show the charge was incurred and paid during the time frame, I don't see how the payment method matters. Sure you're giving up the float that the cc provides, but since it's all "free" anyways, not a big deal.

Anything paid on a credit card, I'm stapling together the: original invoice, credit card statement/online printout showing the charge for the invoiced amount, the payment confirmation page, and the bank statement showing the payment.

I think it's all going to come down to documentation, documentation, and more documentation. I'm also keeping track of each vendor with all the payment information in a spreadsheet and intend on making a binder of stuff for the bank. The easier I can make it for them to find the required information (and their job), the easier I should have it.

I'm probably going to have an hour or two a week invested in this when it's all said and done, but in the grand scheme, it'll be worth it x1000

[AlphaLess]

We just received documents to e—sign our PPP loan. We will be closed for a few more weeks minimum and my employees are on unemployment. I would rather not accept this PPP loan until I open back up.

Does anybody know how long I have before I need to e-sign?

I’m trying to keep the 8 week clock from starting too soon.

The clock starts the day it funds, and the funding has to be within 10 days of approval. But that aside, i'm afraid you (and many others, unfortuantely) are missing the "point" of the PPP program. It's not to help businesses stay afloat. It's to help businesses pay wages, so that those employees can lessen the burden on state unemployment systems (and of course provide funds to pay utilities and rent while the business is not operational at full or any capacity). There are a lot of articles in the press about restaurant owners etc saying they'd rather get the funds when the business is ready to reopen given that volume is down right now, and that is not at all the intent of the program.

Makes sense. They (Congress) even made it in the title.

PAYCHECK PROTECTION PROGRAM

[Ricchan]

We're not giving up the credit card rewards that easy! What we're doing is paying everything we can on our credit card then after the charge posts, make an immediate payment for the items we can claim for forgiveness.

That makes sense. I didn't consider splitting up the payments or paying off forgivable expenses immediately. Thanks for the suggestions!

[simas]

We're not giving up the credit card rewards that easy! What we're doing is paying everything we can on our credit card then after the charge posts, make an immediate payment for the items we can claim for forgiveness.

That makes sense. I didn't consider splitting up the payments or paying off forgivable expenses immediately. Thanks for the suggestions!

I went the other way and switched the bills I expect to pay and ask for forgiveness (utilities) to be paid from account I put PPP money into, at least for 8 weeks . the amount of rewards is not significant enough for me and simplicity of documentation makes it easier. As others, I track , who I paid, when , what category it was (payroll equivalent, utilities, etc) , how, amount, etc. it would also all be in the checking ledger that bank that issued me the loan would have automatically so I expect very easy road with documentation