December 8, 2020 - Douglas Myser

PPP loan forgiveness guide part two. The process to calculate the amount of loan forgiveness requires three steps. One, determine the maximum amount of possible loan forgiveness based on the borrower's expenditures during the 24 weeks after the loan is made. Two, determine the amount, if any, by which the maximum loan forgiveness will be reduced because of reduced employment or reduced salaries and wages. Three, apply the 60% rule that requires that at least 60% of eligible loan forgiveness expenses go towards payroll taxes. PPP loan forgiveness guide part two.

Expenses qualifying for loan forgiveness. The following expenses incurred or paid by the borrower during the 24 weeks following loan origination for determining the 24 week period are eligible for forgiveness. Payroll expenses are defined as, Compensation (not exceeding $46,154 per employee or $20,833 for a shareholder/employed in the form or, gross salary, gross wages, gross commissions, and or gross tips. Vacation, parental, family, medical, or sick leave and allowance for separation or dismissal. Employer contribution for employee group health care coverage. Employer contribution for employee retirement plans and Payment of state and local taxes assessed on compensation of employees.

Non-Payroll Expenses, defined as, Mortgage interest payments for the business on real or personal property, rent or lease payments for the business on real or personal property and utility payments for the business for electricity, gas, water, transportation, telephone, and internet access.

Identifying your 24 week period. The 24 week period during which expenses must be incurred or paid: the 24 weeks beginning on the day the PPP loan was disbursed or For borrowers with a biweekly payroll schedule, the 24 weeks beginning on the first day of the first pay period following the PPP loan disbursement.

Determine the maximum amount of loan forgiveness that will be reduced. Based on a reduction in salaries or wages of ore than 25%.