Optimizing PPP Forgiveness

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the11diesel
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Re: Optimizing PPP Forgiveness

Post by the11diesel »

Stormbringer wrote: Thu Apr 23, 2020 6:27 pm
the11diesel wrote: Thu Apr 23, 2020 9:54 am 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.
It is my understanding that the lending institution is the one that will actually grant forgiveness, not the IRS nor any other government entity. Is this others' belief as well?

One of my main open questions is what is the form of this forgiveness request? I'm assuming this would be a letter addressed to the financial institution that made the loan asking for forgiveness of the loan and providing documentation? Also, I'm assuming that the letter could be sent at any time after the funds are spent.

Anyone have different thoughts on this?

-RJ
simas
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Re: Optimizing PPP Forgiveness

Post by simas »

the11diesel wrote: Fri Apr 24, 2020 4:57 pm
Stormbringer wrote: Thu Apr 23, 2020 6:27 pm
the11diesel wrote: Thu Apr 23, 2020 9:54 am 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.
It is my understanding that the lending institution is the one that will actually grant forgiveness, not the IRS nor any other government entity. Is this others' belief as well?

One of my main open questions is what is the form of this forgiveness request? I'm assuming this would be a letter addressed to the financial institution that made the loan asking for forgiveness of the loan and providing documentation? Also, I'm assuming that the letter could be sent at any time after the funds are spent.

Anyone have different thoughts on this?

-RJ
Some sort of app that issuing bank (lender) would put together based on guidelines/rules/clarifications that do not yet (fully) exists. Does it matter now? you/your business spends what it needs to spend , tracks it, and deals with forgiveness later.

as the finance buff said in his post, worry about getting PPP loan now because you start worrying about exactly how TBD 'forgiveness' procedure would look like..
sergio
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Re: Optimizing PPP Forgiveness

Post by sergio »

Stormbringer wrote: Thu Apr 23, 2020 6:27 pm
the11diesel wrote: Thu Apr 23, 2020 9:54 am 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.
Glad this was so clearly laid out... after $350B had already been dispersed. :oops:
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Stormbringer
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Re: Optimizing PPP Forgiveness

Post by Stormbringer »

The SBA issued new PPP guidance yesterday (4/24). The headlines talked about hedge funds being disqualified, but the guidance also included this language:
The Small Business Administration wrote:all borrowers should review carefully the required certification that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” Borrowers must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business.
This has me wondering if we might be in the early stages of a forgiveness "tightening" process, where the amount forgiven will be reduced by the amount they determine that your business didn't really need. Right now the SBA seems focused on the high profile cases that are fueling public outrage, but perhaps they will eventually extend this line of thinking down to any business that received money in excess of their actual need.
"Compound interest is the most powerful force in the universe." - Albert Einstein
h82goslw
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Re: Optimizing PPP Forgiveness

Post by h82goslw »

TTT

Any new thoughts?
the11diesel
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Re: Optimizing PPP Forgiveness

Post by the11diesel »

anil686 wrote: Mon Apr 20, 2020 12:49 pm 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...
This is interesting, and probably the most detailed explanation of the "what happens next" regarding loan forgiveness.

Is the bank required to wait the eight weeks prior to sending the documentation to the SBA? The reason I ask is because if a company received the funds on Day 1, spent them all on payroll on Day 2, then requested forgiveness on Day 3, shouldn't the bank be able to send in its paperwork to the SBA for forgiveness? Or, is the eight weeks a stipulation?

-RJ
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StevieG72
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Re: Optimizing PPP Forgiveness

Post by StevieG72 »

Another thing to keep in mind is that EIDL and PPP proceeds should not be used for the same expenses.

If EIDL proceeds are used for payroll the amount used offsets the PPP loan forgiveness.

I plan on using EIDL for accounts payable. EIDL was funded this week. PPP is still an unknown.
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simas
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Re: Optimizing PPP Forgiveness

Post by simas »

the11diesel wrote: Thu Apr 30, 2020 7:14 pm
anil686 wrote: Mon Apr 20, 2020 12:49 pm 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...
This is interesting, and probably the most detailed explanation of the "what happens next" regarding loan forgiveness.

Is the bank required to wait the eight weeks prior to sending the documentation to the SBA? The reason I ask is because if a company received the funds on Day 1, spent them all on payroll on Day 2, then requested forgiveness on Day 3, shouldn't the bank be able to send in its paperwork to the SBA for forgiveness? Or, is the eight weeks a stipulation?

-RJ
it is in the law they passed that set up the program and explained in multiple areas including below

https://www.sba.gov/sites/default/files ... 2020_2.pdf

actual law https://www.congress.gov/116/bills/hr74 ... C24489743B , PPP is section 1102
the11diesel
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Re: Optimizing PPP Forgiveness

Post by the11diesel »

simas wrote: Thu Apr 30, 2020 10:04 pm
the11diesel wrote: Thu Apr 30, 2020 7:14 pm
anil686 wrote: Mon Apr 20, 2020 12:49 pm 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...
This is interesting, and probably the most detailed explanation of the "what happens next" regarding loan forgiveness.

Is the bank required to wait the eight weeks prior to sending the documentation to the SBA? The reason I ask is because if a company received the funds on Day 1, spent them all on payroll on Day 2, then requested forgiveness on Day 3, shouldn't the bank be able to send in its paperwork to the SBA for forgiveness? Or, is the eight weeks a stipulation?

-RJ
it is in the law they passed that set up the program and explained in multiple areas including below

https://www.sba.gov/sites/default/files ... 2020_2.pdf

actual law https://www.congress.gov/116/bills/hr74 ... C24489743B , PPP is section 1102
Thanks Simas. Could you please direct me to where in the FAQs (or the law) it explicitly says that the bank has to wait the full eight weeks prior to sending the documentation to the SBA? Maybe I'm missing it.
simas
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Re: Optimizing PPP Forgiveness

Post by simas »

the11diesel wrote: Fri May 01, 2020 7:12 am
simas wrote: Thu Apr 30, 2020 10:04 pm
the11diesel wrote: Thu Apr 30, 2020 7:14 pm
anil686 wrote: Mon Apr 20, 2020 12:49 pm 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...
This is interesting, and probably the most detailed explanation of the "what happens next" regarding loan forgiveness.

Is the bank required to wait the eight weeks prior to sending the documentation to the SBA? The reason I ask is because if a company received the funds on Day 1, spent them all on payroll on Day 2, then requested forgiveness on Day 3, shouldn't the bank be able to send in its paperwork to the SBA for forgiveness? Or, is the eight weeks a stipulation?

-RJ
it is in the law they passed that set up the program and explained in multiple areas including below

https://www.sba.gov/sites/default/files ... 2020_2.pdf

actual law https://www.congress.gov/116/bills/hr74 ... C24489743B , PPP is section 1102
Thanks Simas. Could you please direct me to where in the FAQs (or the law) it explicitly says that the bank has to wait the full eight weeks prior to sending the documentation to the SBA? Maybe I'm missing it.
Question 20, Question 9 mention 8 week period explicitly.

. Question: The amount of forgiveness of a PPP loan depends on the borrower’s payroll costs over an eight-week period; when does that eight-week period begin?
Answer: The eight-week period begins on the date the lender makes the first disbursement of the PPP loan to the borrower. The lender must make the first disbursement of the loan no later than ten calendar days from the date of loan approval

you are welcome to contact them directly if you wish. and no , the laws are not written as 'this is not allowed' (SBA lender can not do X, or Y, or Z) instead they describe how it works. if you are looking for explicit language of bank must wait x seconds before doing A/B/C, you may be disappointed...
Last edited by simas on Fri May 01, 2020 7:25 am, edited 1 time in total.
theplayer11
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Re: Optimizing PPP Forgiveness

Post by theplayer11 »

Still have not seen any mention of HSA contributions by >2% scorp owners being forgiven. They are handled the same way as health care premiums, included in Box 1 of w-2. Definitely a part of scorp employee compensation, but why no mention anywhere? From the ruling below, not sure where HSA contributions would fall, not under salary,wages. The 2nd part(employee benefits) seems where it should fall under, but does the word "consisting" mean that only what follows can be forgiven?...health insurance premiums, retirement. thoughts?

The actual ruling:
"Payroll costs consist of compensation
to employees (whose principal place of
residence is the United States) in the
form of salary, wages, commissions, or
similar compensation"

"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;"
CBZ
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Re: Optimizing PPP Forgiveness

Post by CBZ »

Congrats to everyone who received the PPP loan. I'm confused on the mechanics of running payroll using PPP money. I'm a sole owner S corp making over 100K per year. I plan on paying myself a gross wage of 8333K on May 1 and June 1. However, I withheld Federal/State taxes from the $8333 for May payroll. Now I'm reading that Federal taxes withheld by the employer are not eligible for loan forgiveness. So should I have run the payroll of 8333 and not withheld any Federal taxes? Or should I have, for a net pay of 8333, added onto that Federal tax withholdings, for a gross pay of approx. 12K?

My CPA advised me to pay myself $8333, and from that withhold my normal % of Fed/State taxes ....
theplayer11
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Re: Optimizing PPP Forgiveness

Post by theplayer11 »

CBZ wrote: Fri May 01, 2020 1:39 pm Congrats to everyone who received the PPP loan. I'm confused on the mechanics of running payroll using PPP money. I'm a sole owner S corp making over 100K per year. I plan on paying myself a gross wage of 8333K on May 1 and June 1. However, I withheld Federal/State taxes from the $8333 for May payroll. Now I'm reading that Federal taxes withheld by the employer are not eligible for loan forgiveness. So should I have run the payroll of 8333 and not withheld any Federal taxes? Or should I have, for a net pay of 8333, added onto that Federal tax withholdings, for a gross pay of approx. 12K?

My CPA advised me to pay myself $8333, and from that withhold my normal % of Fed/State taxes ....
the amount would be $7,692, not $8,333. Your CPA should now this as it's in the ruling. $1,923/wk X 52 weeks =$99,996
Luckywon
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Re: Optimizing PPP Forgiveness

Post by Luckywon »

theplayer11 wrote: Fri May 01, 2020 1:55 pm
CBZ wrote: Fri May 01, 2020 1:39 pm Congrats to everyone who received the PPP loan. I'm confused on the mechanics of running payroll using PPP money. I'm a sole owner S corp making over 100K per year. I plan on paying myself a gross wage of 8333K on May 1 and June 1. However, I withheld Federal/State taxes from the $8333 for May payroll. Now I'm reading that Federal taxes withheld by the employer are not eligible for loan forgiveness. So should I have run the payroll of 8333 and not withheld any Federal taxes? Or should I have, for a net pay of 8333, added onto that Federal tax withholdings, for a gross pay of approx. 12K?

My CPA advised me to pay myself $8333, and from that withhold my normal % of Fed/State taxes ....
the amount would be $7,692, not $8,333. Your CPA should now this as it's in the ruling. $1,923/wk X 52 weeks =$99,996
Is it $7,692 net after federal payroll and state income taxes?

Are the state withholding taxes also considered part of payroll, forgivable, but separate from the prorated $100,000 annual limitation?
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StevieG72
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Re: Optimizing PPP Forgiveness

Post by StevieG72 »

So the guidelines for PPP forgiveness are clear as mud, I expect there to be some updates in the future as funding is the primary focus at this time.

I was fortunate enough to have both EIDL funded as well as PPP loan. This adds to the confusion for navigating loan forgiveness. ( I know good problem to have) While there is language referencing refinancing the EIDL in to the PPP, I believe this would be applicable to any amounts over $10,000. In regards to the $10,000 EIDL advance grant it appears that PPP forgiveness will be reduced by this amount.

The clock started ticking for me on Monday of this week for PPP funds.

Majority if not all of PPP will be used for payroll. Not sure how employee bonuses / hazard pay are scrutinized. I plan on paying bonuses to all employees minus owners.

Has anyone found any good resources discussing these topics? I have found very little information.
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spectec
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Re: Optimizing PPP Forgiveness

Post by spectec »

This is a great discussion with many question posing badly-needed answers from SBA, since they will be making the ultimate decision. Unfortunately, some of those decisions will likely come after we have already chosen a course of action which will ultimately turn out to be wrong.

My only suggestion at this point is to try and choose the least-risky or most conservative course of action whenever a choice is possible. In other situations, it's going to be necessary to take a risk and hope for the best. Some of those risks may come back to bite you.

I do think in some cases there's too much emphasis placed on loan forgiveness. Paying bonuses just to exhaust the money may be a foolish waste of funds. Provided the 75% threshold and FTE requirements are met for total payroll costs, but the "Other" expenses don't add up to enough to consume the remaining 25%, it might be more judicious to forego the loan forgiveness rather than pay bonuses. That money might be needed to help pay operating expenses in August, September, etc. The 1% interest rate and 2-year repayment period would look like a bargain for someone who finds themselves in that situation later in the year.

I do think the most productive thing to do is to keep an eye on the SBA site for whatever definitive answers they may provide.
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Elysium
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Re: Optimizing PPP Forgiveness

Post by Elysium »

Great thread, lots of good information here.

I got my funding today, 5/6, and here is my plan:

- 8 weeks starts from today 5/6 and ends on 7/1 (56 days)
- plan to run bi-weekly payroll to hit days that fall within this period, starting 5/15, 5/29, 6/12, 6/26
- will use all the funds received for payroll, salary only, no retirement or health deductions
- split the funds evenly into 4 paychecks as above, monthly reports for May & June should cover 100% of funds
- ask for forgiveness on 7/1 (or any days thereafter but before 60 days)

Does this sound about right? My only question is, do they actually care what days/weeks the pay were for, other than the dates paychecks were issued? for instance, do they ask if the employee was paid of 5/15 then that pay is for days worked before or after funding? I guess that won't matter so long as pay dates fell within the 56 days period.
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Harry Livermore
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Re: Optimizing PPP Forgiveness

Post by Harry Livermore »

Here's a question about the 75% rule:
I received $20,833 PPP funds.
Net earnings of my LLC are always in excess of $100K, but I am restricted to the $100K limit. $100K divided by 52 is $1,923 as noted here and in other threads. 8 weeks of payroll at $1,923 per week is $15,384. But that is only 73.84% of the $20,833 I received. I need to spend another +/- $250 to get over 75%.
I thought the requirement was that, in order to have any or all the loan forgiven, a company has to use AT LEAST 75% on payroll costs? Am I missing something here? It seems like a Catch-22. I cannot payroll more than $100K (or $1,923 per week for 8 weeks) and yet I MUST use more than that.
I DO have a couple of independent contractors that I could give some tasks to. Normally they show up on my Schedule C on line 10, Commissions And Fees. Not sure if that cuts the mustard.
The only other "payroll" expense I have is the retirement plan, but that's a 401(k) and profit-share, not a "qualified" plan as I understand... so I'm not sure if that counts. I think specifically I'd have to use it towards the profit-share, as the 401(k) is just salary deferral? The amounts are co-mingled in the same investment account but kept track of separately in the plan record.
Or have I completely misinterpreted the 75% rule?
All of this is in an email to the CPA, but thought I'd add it to the thread as well.
Cheers
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MP123
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Re: Optimizing PPP Forgiveness

Post by MP123 »

Harry Livermore wrote: Wed May 06, 2020 11:44 am Here's a question about the 75% rule:
I received $20,833 PPP funds.
Net earnings of my LLC are always in excess of $100K, but I am restricted to the $100K limit. $100K divided by 52 is $1,923 as noted here and in other threads. 8 weeks of payroll at $1,923 per week is $15,384. But that is only 73.84% of the $20,833 I received. I need to spend another +/- $250 to get over 75%.
I thought the requirement was that, in order to have any or all the loan forgiven, a company has to use AT LEAST 75% on payroll costs? Am I missing something here? It seems like a Catch-22. I cannot payroll more than $100K (or $1,923 per week for 8 weeks) and yet I MUST use more than that.
I DO have a couple of independent contractors that I could give some tasks to. Normally they show up on my Schedule C on line 10, Commissions And Fees. Not sure if that cuts the mustard.
The only other "payroll" expense I have is the retirement plan, but that's a 401(k) and profit-share, not a "qualified" plan as I understand... so I'm not sure if that counts. I think specifically I'd have to use it towards the profit-share, as the 401(k) is just salary deferral? The amounts are co-mingled in the same investment account but kept track of separately in the plan record.
Or have I completely misinterpreted the 75% rule?
All of this is in an email to the CPA, but thought I'd add it to the thread as well.
Cheers
Although there isn't any definitive guidance yet I don't think the bolded part above is correct.

It would be more accurate to say that of the forgiven portion of the loan 75% must be for payroll.

From the interim final rule:
The Administrator has
determined in consultation with the
Secretary that 75 percent is an
appropriate percentage in light of the
Act’s overarching focus on keeping
workers paid and employed. Further,
the Administrator and the Secretary
believe that applying this threshold to
loan forgiveness is consistent with the
structure of the Act, which provides a
loan amount 75 percent of which is
equivalent to eight weeks of payroll (8
weeks/2.5 months = 56 days/76 days =
74 percent rounded up to 75 percent).
Limiting non-payroll costs to 25 percent
of the forgiveness amount will align
these elements of the program, and will
also help to ensure that the finite
appropriations available for PPP loan
forgiveness are directed toward payroll
protection. SBA will issue additional
guidance on loan forgiveness.
So in your case the $15,384 would be forgiven, but the remaining portion would turn into a %1 loan (assuming you didn't pay it back). This may be clarified the other way too of course, but then no Schedule C filers would qualify for any forgiveness since 8/52 < 2.5/12 and there's no other expenses available to a Schedule C to spend potentially forgivable money on since it's all based on your net profit capped at $100k.
jjface
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Re: Optimizing PPP Forgiveness

Post by jjface »

Harry Livermore wrote: Wed May 06, 2020 11:44 am Here's a question about the 75% rule:
I received $20,833 PPP funds.
Net earnings of my LLC are always in excess of $100K, but I am restricted to the $100K limit. $100K divided by 52 is $1,923 as noted here and in other threads. 8 weeks of payroll at $1,923 per week is $15,384. But that is only 73.84% of the $20,833 I received. I need to spend another +/- $250 to get over 75%.
I thought the requirement was that, in order to have any or all the loan forgiven, a company has to use AT LEAST 75% on payroll costs? Am I missing something here? It seems like a Catch-22. I cannot payroll more than $100K (or $1,923 per week for 8 weeks) and yet I MUST use more than that.
I DO have a couple of independent contractors that I could give some tasks to. Normally they show up on my Schedule C on line 10, Commissions And Fees. Not sure if that cuts the mustard.
The only other "payroll" expense I have is the retirement plan, but that's a 401(k) and profit-share, not a "qualified" plan as I understand... so I'm not sure if that counts. I think specifically I'd have to use it towards the profit-share, as the 401(k) is just salary deferral? The amounts are co-mingled in the same investment account but kept track of separately in the plan record.
Or have I completely misinterpreted the 75% rule?
All of this is in an email to the CPA, but thought I'd add it to the thread as well.
Cheers
75% of the forgiven portion must be payroll not 75% of the full loan. ie 75% of the $15,384. Spend all that on payroll and you are fine.

The other $5,449 is treated as a 1% loan requiring repayment.
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gasdoc
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Re: Optimizing PPP Forgiveness

Post by gasdoc »

I am a sole proprietor, independent contractor, with only a single checking account. I don't have a separate business account because I simply track expenses by throwing the receipts in a manilla folder until the end of the year. I qualified for the PPP loan itself with a schedule C. I don't know of any way I will be able to demonstrate that the PPP funds were paid out during the first eight weeks other than the fact that the entire check went into my account on day one. I guess I might back out the non-forgiveable portion into a separate account, but what does that really prove? Good thread. Thank you.

gasdoc
Luckywon
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Re: Optimizing PPP Forgiveness

Post by Luckywon »

Is it clear to what extent 401k employee deferral and employer profit sharing contributions may be considered part of payroll for loan forgiveness? It would simplify things greatly if I could make my 19.5k employee deferral plus $6.5k catch up contributions with the 8 week period to make the full loan amount forgiveable without too much (or any) further documentation.
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cowdogman
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Re: Optimizing PPP Forgiveness

Post by cowdogman »

gasdoc wrote: Wed May 06, 2020 3:12 pm I am a sole proprietor, independent contractor, with only a single checking account. I don't have a separate business account because I simply track expenses by throwing the receipts in a manilla folder until the end of the year. I qualified for the PPP loan itself with a schedule C. I don't know of any way I will be able to demonstrate that the PPP funds were paid out during the first eight weeks other than the fact that the entire check went into my account on day one. I guess I might back out the non-forgiveable portion into a separate account, but what does that really prove? Good thread. Thank you.

gasdoc
Same situation (self-employed Schedule C) but I have a business account where the PPP funds were deposited. I'm writing myself a check each week from the business account for $3,000 and depositing it my personal checking account. $3,000 is less than 1/52 of my 2019 Schedule C net profit but more than 1/52 x $100,000 ($1,923.08), my thought being that the rules of forgiveness may change and so I want to use the full $20,832.

From reading the rules so far I do NOT think writing myself a weekly check is necessary, but the rules may change.

Gasdoc, you may want to set up a business account (which can be a hassle--more requirements) and do the same. Plus, keeping your business income and expenses separate is, I think, a good practice.
Last edited by cowdogman on Wed May 06, 2020 3:30 pm, edited 1 time in total.
h82goslw
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Re: Optimizing PPP Forgiveness

Post by h82goslw »

gasdoc wrote: Wed May 06, 2020 3:12 pm I am a sole proprietor, independent contractor, with only a single checking account. I don't have a separate business account because I simply track expenses by throwing the receipts in a manilla folder until the end of the year. I qualified for the PPP loan itself with a schedule C. I don't know of any way I will be able to demonstrate that the PPP funds were paid out during the first eight weeks other than the fact that the entire check went into my account on day one. I guess I might back out the non-forgiveable portion into a separate account, but what does that really prove? Good thread. Thank you.

gasdoc
I’m in same exact business scenario as you. I opened a separate checking account and put entire loan amount the day after receiving funds. Each week I will transfer over “payroll” of 52/8 based on 2019 schedule C amount income from that new account to my regular checking.
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gasdoc
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Re: Optimizing PPP Forgiveness

Post by gasdoc »

h82goslw wrote: Wed May 06, 2020 3:28 pm
gasdoc wrote: Wed May 06, 2020 3:12 pm I am a sole proprietor, independent contractor, with only a single checking account. I don't have a separate business account because I simply track expenses by throwing the receipts in a manilla folder until the end of the year. I qualified for the PPP loan itself with a schedule C. I don't know of any way I will be able to demonstrate that the PPP funds were paid out during the first eight weeks other than the fact that the entire check went into my account on day one. I guess I might back out the non-forgiveable portion into a separate account, but what does that really prove? Good thread. Thank you.

gasdoc
I’m in same exact business scenario as you. I opened a separate checking account and put entire loan amount the day after receiving funds. Each week I will transfer over “payroll” of 52/8 based on 2019 schedule C amount income from that new account to my regular checking.
I've had the funds for a week now, intermingled. Maybe it's not too late to separate it out into a separate account and start paying myself weekly "payroll." Can't hurt. I could even make it monthly, since that is how I typically pay myself anyway.

gasdoc

Edited P.S. I now have a new checking account labeled "PPP loan funds."
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MP123
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Re: Optimizing PPP Forgiveness

Post by MP123 »

Luckywon wrote: Wed May 06, 2020 3:25 pm Is it clear to what extent 401k employee deferral and employer profit sharing contributions may be considered part of payroll for loan forgiveness? It would simplify things greatly if I could make my 19.5k employee deferral plus $6.5k catch up contributions with the 8 week period to make the full loan amount forgiveable without too much (or any) further documentation.
No, it's not clear at this point.

But based on how they were used for loan qualification it seems likely that the employee salary deferral would count as part of wages subject to the $100k cap. And the employer contribution would be additional on top of that cap.

So perhaps 8/52 of that net amount would be forgivable, but I don't think the entire i401k contribution amount would be forgivable because everything else is eight weeks of an annualized amount.
DavidRoseMountain
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Re: Optimizing PPP Forgiveness

Post by DavidRoseMountain »

My PPP amount just hit my business checking account.

I'm in the same boat as GasDoc.

I will just give myself a monthly payroll - I'll probably use a check. The payroll will be based on the amount used in the application for which the PPP loan amount was determined.

I might just use the business checking account debit card to pay the business utilities, etc.
spectec
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Re: Optimizing PPP Forgiveness

Post by spectec »

I heard on an accounting forum that SBA plans to issue more loans forgiveness guidance on May 15. But that date is just another internet rumor at this point. :)

May 15 will be late in the game for many PPP recipients to make major changes, as they will be 4 weeks or more into the process. But maybe there will be time to adjust the margins of their spending plan.

On another note, I'm attending a webinar in a couple of days which asks the question, "Is the PPP a Trojan Horse in full or in part?" Looks like it could be an interesting discussion, but then maybe the title is just a come-on to get participants.
Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it. - Will Rogers
ig77
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Re: Optimizing PPP Forgiveness

Post by ig77 »

bbqguru wrote: Wed Apr 22, 2020 1:02 pm Image
In the spreadsheet, is EE MO SIT - State tax withholding? If so, is this not eligible for forgiveness?

I thought the all items under gross pay (the ones that show up in my paystub are EE Medicare, EE Fed, EE SS, EE State tax) are eligible.
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Harry Livermore
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Re: Optimizing PPP Forgiveness

Post by Harry Livermore »

MP123 and jjface, thanks.
The CPA tells me there will be more guidance. He also indicated that it's OK in my case to simply draw 1/12 of $100K in May, and again in June, since my draws are typically lumpy and erratic anyway; no need to take a set amount each week. He confirms that paying a contractor is NOT a forgivable expense. So it looks like my draw and rent are the only expenses allowed in my case.
gasdoc, I also set up a checking account (business account) called "PPP Funds", separate from my regular business checking and savings accounts.
I also set up a spreadsheet to track it, in the absence of Quickbooks, 941, or payroll report. There will be so few transactions it should be easy to present everything to the bank or SBA in a clear manner.
Cheers

Image
Sahara
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Re: Optimizing PPP Forgiveness

Post by Sahara »

Does anyone know whether a garnishment or employee reimbursement for an ACA premium which is included in gross pay will have to be backed out of the forgiveness amount?
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gasdoc
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Re: Optimizing PPP Forgiveness

Post by gasdoc »

spectec wrote: Wed May 06, 2020 8:39 pm I heard on an accounting forum that SBA plans to issue more loans forgiveness guidance on May 15. But that date is just another internet rumor at this point. :)

May 15 will be late in the game for many PPP recipients to make major changes, as they will be 4 weeks or more into the process. But maybe there will be time to adjust the margins of their spending plan.

On another note, I'm attending a webinar in a couple of days which asks the question, "Is the PPP a Trojan Horse in full or in part?" Looks like it could be an interesting discussion, but then maybe the title is just a come-on to get participants.
Is the webinar a public event? Sounds interesting.

gasdoc
bbqguru
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Re: Optimizing PPP Forgiveness

Post by bbqguru »

ig77 wrote: Wed May 06, 2020 10:52 pm
bbqguru wrote: Wed Apr 22, 2020 1:02 pm Image
In the spreadsheet, is EE MO SIT - State tax withholding? If so, is this not eligible for forgiveness?

I thought the all items under gross pay (the ones that show up in my paystub are EE Medicare, EE Fed, EE SS, EE State tax) are eligible.
The only thing the rules have on state taxes is, "Payment of state and local taxes imposed on the compensation of employees."

We were told by our accounting firm that it means unemployment taxes and possible worker's compensation if it is imposed by your state vs insurance, etc... State income tax isn't imposed on compensation so it doesn't count.
lgb
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Re: Optimizing PPP Forgiveness

Post by lgb »

gasdoc wrote: Thu May 07, 2020 9:01 am
spectec wrote: Wed May 06, 2020 8:39 pm I heard on an accounting forum that SBA plans to issue more loans forgiveness guidance on May 15. But that date is just another internet rumor at this point. :)

May 15 will be late in the game for many PPP recipients to make major changes, as they will be 4 weeks or more into the process. But maybe there will be time to adjust the margins of their spending plan.

On another note, I'm attending a webinar in a couple of days which asks the question, "Is the PPP a Trojan Horse in full or in part?" Looks like it could be an interesting discussion, but then maybe the title is just a come-on to get participants.
Is the webinar a public event? Sounds interesting.

gasdoc
Agreed! - Would love to join that!
DavidRoseMountain
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Re: Optimizing PPP Forgiveness

Post by DavidRoseMountain »

I asked the banker where I got my PPP loan from and she said writing a check to myself for the month is a good paper trail for documenting my payroll.
Bosro
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Re: Optimizing PPP Forgiveness

Post by Bosro »

https://home.treasury.gov/system/files/ ... cation.pdf

The PPP Forgiveness Form is now available.
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Cubicle
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Re: Optimizing PPP Forgiveness

Post by Cubicle »

^^^ Thank you for posting this!!!
"Oh look another bajillion point declin-Ooooh!!! A coupon for pizza!!!!" <--- This is what everyone's IPS should be. ✓✓✓
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MP123
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Re: Optimizing PPP Forgiveness

Post by MP123 »

This section would seem to restrict owners forgivable compensation to being the same as their 2019 compensation.
Line 9: Enter any amounts paid to owners (owner-employees, a self-employed individual, or general partners). This
amount is capped at $15,385 (the eight-week equivalent of $100,000 per year) for each individual or the eight-week
equivalent of their applicable compensation in 2019, whichever is lower. See Interim Final Rule on Additional Eligibility
Criteria and Requirements for Certain Pledges of Loans posted on April 14, 2020 for more information (85 FR 21747,
21749).
So owner raises to absorb the forgivable loan amount seem to be out. That doesn't seem to be the case for non-owner employees though.
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Stinky
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Re: Optimizing PPP Forgiveness

Post by Stinky »

Bosro wrote: Fri May 15, 2020 10:22 pm https://home.treasury.gov/system/files/ ... cation.pdf

The PPP Forgiveness Form is now available.
Thank you so much for pointing us to this form.

Now the BH review/analysis of the form can start.....
It's a GREAT day to be alive! - Travis Tritt
GoldenFinch
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Re: Optimizing PPP Forgiveness

Post by GoldenFinch »

Stinky wrote: Sat May 16, 2020 5:09 am
Bosro wrote: Fri May 15, 2020 10:22 pm https://home.treasury.gov/system/files/ ... cation.pdf

The PPP Forgiveness Form is now available.
Thank you so much for pointing us to this form.

Now the BH review/analysis of the form can start.....
The “alternative payroll covered period” addition is going to help businesses who pay their employees twice a month. You no longer have to start your PPP forgiveness period on the day you receive the funds, you can start on the day of your first pay period after you receive funds. So now you can capture the full 56 days of payroll and expenses.
spectec
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Re: Optimizing PPP Forgiveness

Post by spectec »

OFFICIAL SBA DOCUMENT for calculating PPP Forgiveness is now available. Many, but not all, questions posed on this thread and elsewhere are now unequivocally answered.

I do, however, expect there to be subsequent clarifications, revisions, and tweaks as SBA receives inquiries regarding unusual situations.

https://www.sba.gov/sites/default/files ... cation.pdf
Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it. - Will Rogers
theplayer11
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Re: Optimizing PPP Forgiveness

Post by theplayer11 »

read quickly, still not sure if scorp owners employER i401K contributions are forgivable. Anyone have a take on this?
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MP123
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Re: Optimizing PPP Forgiveness

Post by MP123 »

theplayer11 wrote: Sat May 16, 2020 12:32 pm read quickly, still not sure if scorp owners employER i401K contributions are forgivable. Anyone have a take on this?
It appears that employer paid benefits are only forgivable for employees, not for owners. So for an i401k the employER contribution probably doesn't count. I'm sure more info will be coming though.
theplayer11
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Re: Optimizing PPP Forgiveness

Post by theplayer11 »

MP123 wrote: Sat May 16, 2020 12:51 pm
theplayer11 wrote: Sat May 16, 2020 12:32 pm read quickly, still not sure if scorp owners employER i401K contributions are forgivable. Anyone have a take on this?
It appears that employer paid benefits are only forgivable for employees, not for owners. So for an i401k the employER contribution probably doesn't count. I'm sure more info will be coming though.
At first I thought this as well, but I don't find it clear.
"Compensation to Owners
Line 9. Total amount paid to owner-employees/self-employed individual/general partners:"

i401k employer contributions are not paid to the "owner-employee". Line 9 gets added to Line 7, "Total amount paid by Borrower for employer contributions to employee retirement plans" in calculating total forgiveness.
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MP123
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Re: Optimizing PPP Forgiveness

Post by MP123 »

theplayer11 wrote: Sat May 16, 2020 1:07 pm
MP123 wrote: Sat May 16, 2020 12:51 pm
theplayer11 wrote: Sat May 16, 2020 12:32 pm read quickly, still not sure if scorp owners employER i401K contributions are forgivable. Anyone have a take on this?
It appears that employer paid benefits are only forgivable for employees, not for owners. So for an i401k the employER contribution probably doesn't count. I'm sure more info will be coming though.
At first I thought this as well, but I don't find it clear.
"Compensation to Owners
Line 9. Total amount paid to owner-employees/self-employed individual/general partners:"

i401k employer contributions are not paid to the "owner-employee". Line 9 gets added to Line 7, "Total amount paid by Borrower for employer contributions to employee retirement plans" in calculating total forgiveness.
Agreed it's not as clear as it should be.

The guidance for schedule C was filers was very clear that fringe benefits only counted for employees, not the owner. It seems likely that would be the case for S-Corps too.

But, I haven't seen anything that clearly says lines 6 and 7 don't include owner benefits. Or perhaps those amounts are included on line 9 but subject to the cap.
johnlard
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Re: Optimizing PPP Forgiveness

Post by johnlard »

Exactly. It’s confusing. And what about C-corp owners who do file schedule c? This is not year as clear as it needs to be.
theplayer11
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Re: Optimizing PPP Forgiveness

Post by theplayer11 »

MP123 wrote: Sat May 16, 2020 1:26 pm
theplayer11 wrote: Sat May 16, 2020 1:07 pm
MP123 wrote: Sat May 16, 2020 12:51 pm
theplayer11 wrote: Sat May 16, 2020 12:32 pm read quickly, still not sure if scorp owners employER i401K contributions are forgivable. Anyone have a take on this?
It appears that employer paid benefits are only forgivable for employees, not for owners. So for an i401k the employER contribution probably doesn't count. I'm sure more info will be coming though.
At first I thought this as well, but I don't find it clear.
"Compensation to Owners
Line 9. Total amount paid to owner-employees/self-employed individual/general partners:"

i401k employer contributions are not paid to the "owner-employee". Line 9 gets added to Line 7, "Total amount paid by Borrower for employer contributions to employee retirement plans" in calculating total forgiveness.
Agreed it's not as clear as it should be.

The guidance for schedule C was filers was very clear that fringe benefits only counted for employees, not the owner. It seems likely that would be the case for S-Corps too.

But, I haven't seen anything that clearly says lines 6 and 7 don't include owner benefits. Or perhaps those amounts are included on line 9 but subject to the cap.
In calculating the amount of the loan, owner salary was clearly separate from owner benefits. If no further guidance, I will include Employer i401k contributions on line 7 and see what happens.
theplayer11
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Re: Optimizing PPP Forgiveness

Post by theplayer11 »

https://www.currentfederaltaxdevelopmen ... sed-by-sba

Their take is scorp i401k employer contributions are allowed for scorps.

"Note that each item only includes amounts paid to employee programs. Nothing on the application says these amounts will not include payments for owner-employees, though prior IFR guidance for self-employed individuals indicated that these costs would not count for the self-employed.

Since self-employed individuals and partners of a partnership are not employees, the wording would seem to exclude benefits allocable to either category from being considered a payroll cost. And, alternatively, since a shareholder of a corporation will be treated as the employee of the corporation for compensation for any services performed, the benefits for the owner-employee would appear to count in this calculation."

"Example

Alice owns 100% of the stock of Underdog Pet Care, Inc. In addition to counting the cash compensation paid to Alice as a payroll cost, the corporation can also count the amounts paid during the appropriate covered period for health care plan employer contributions, retirement plan employer contributions and state payroll taxes on Alice’s compensation during the period. Alice is an employee of Underdog Pet Care, Inc.

However, if Underdog Pet Care was operated as a sole proprietorship with Alice being the proprietor, those additional payroll costs could not be considered in the forgiveness calculation to the extend they related to Alice. Alice is not an employee of Underdog Pet Care."
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MP123
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Re: Optimizing PPP Forgiveness

Post by MP123 »

The link in the instructions for Line 9:
Line 9: Enter any amounts paid to owners (owner-employees, a self-employed individual, or general partners). This amount is capped at $15,385 (the eight-week equivalent of $100,000 per year) for each individual or the eight-week equivalent of their applicable compensation in 2019, whichever is lower. See Interim Final Rule on Additional Eligibility Criteria and Requirements for Certain Pledges of Loans posted on April 14, 2020 for more information (85 FR 21747, 21749).
directs to the 4/14 IFR that talked about Schedule C filers.

So, an optimistic interpretation might be that line 9 "Compensation to Owners" is referring to the amount Sch C owners can claim based on line 31 of prior year's Schedule C. Rather than compensation paid to corporation employees who happen to be shareholders.

In that case all employee wages and benefits (including for S- and C-corp owners) might go in one of the two tables, with benefits included on lines 6 and 7 in addition. And such compensation wouldn't be limited to the 2019 amounts, the way it is for Sch C people, which would sort of make sense.

I expect there will be more information from SBA soon. It sure seems like they could have defined "owner-employee" along with everything else on that form.
theplayer11
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Re: Optimizing PPP Forgiveness

Post by theplayer11 »

MP123 wrote: Sat May 16, 2020 6:00 pm The link in the instructions for Line 9:
Line 9: Enter any amounts paid to owners (owner-employees, a self-employed individual, or general partners). This amount is capped at $15,385 (the eight-week equivalent of $100,000 per year) for each individual or the eight-week equivalent of their applicable compensation in 2019, whichever is lower. See Interim Final Rule on Additional Eligibility Criteria and Requirements for Certain Pledges of Loans posted on April 14, 2020 for more information (85 FR 21747, 21749).
directs to the 4/14 IFR that talked about Schedule C filers.

So, an optimistic interpretation might be that line 9 "Compensation to Owners" is referring to the amount Sch C owners can claim based on line 31 of prior year's Schedule C. Rather than compensation paid to corporation employees who happen to be shareholders.

In that case all employee wages and benefits (including for S- and C-corp owners) might go in one of the two tables, with benefits included on lines 6 and 7 in addition. And such compensation wouldn't be limited to the 2019 amounts, the way it is for Sch C people, which would sort of make sense.

I expect there will be more information from SBA soon. It sure seems like they could have defined "owner-employee" along with everything else on that form.
Table Instructions
Employee’s Name: Separately list each employee. Do not include any independent contractors, owner-employees, self-employed
individuals, or partners.

Who would be owner-employees..if not self-employed schedule C filers or partners? Wouldn't that have to be c-corp/s-corp owners? But as you pointed out, it references to the 4/14 ruling which is only about sch c filers.
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