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Richard Dellefave, CPA / Principal in the RINA San Francisco office.
Richard DelleFaveCPA / Principalview bio

Howard Zangwill, CPA, Managing Director of Audit and Accounting in the Oakland office.
Howard ZangwillCPA / Managing Director of Audit and Accountingview bio

PPP Loan Forgiveness FAQ

5/27/2020

This page offers responses to questions that were asked during and immediately after the May 20, 2020 webinar "Insight into Completing the PPP Loan Forgiveness Application". A recording of that webinar is available in RINA's COVID-19 video library.

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General PPP Loan Questions

I've heard the State may try to apply the PPP as taxable income.  Is there any further clarification to this? 
We are awaiting further guidance from California on this matter.  Stay tuned.

Is the provision for the employee quit or fired for cause reduce the numbers in comparison to 2019 employee list or just prior to COVID-19?
No, the Loan Forgiveness application clarified that an employee fired for cause does not impact the loan forgiveness

Do we send the forgiveness documents to the bank that provided the funds?
The loan forgiven application specifies documents required to submit to the bank.

Since the PPP expenses cannot be deducted from our taxable income, what's the best way to report it on our P&L?
Currently the loan forgiveness is not included in taxable income and the expenses are not deductible.  Congress is considering allowing the expenses to be deductible.  Stay tuned.

We recommend continuing with your regular recording of expenses.  When filing the tax return, we recommend deduct the total amount of the forgiveness from your expenses as a separate expense line item.

PPP Loan Fund Usage

Will utilities such as recology, security & fire monitoring, storage (also a form of rent), freight be counted under utilities?
No, these costs are not allowable.  The application specifies the following “covered utility payments: business payments for a service for the distribution of electricity, gas, water, transportation, telephone, or internet access for which service began before February 15, 2020.

What about if an owner previously made less than $100k, can their pay be increased closer to $100k during the covered period?
Self employed pay is based on their 2019 Schedule C income.  The Forgiveness application states:

"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."

What if our lease renewed with a whole new lease on 5/1/20, but was in place since 5/1/15 previously?
Yes, this would qualify.

I was “no”  on the returning to FTE by June 30. IF we do not spend the amount awarded. Are there restrictions on how the amount not forgiven is spent?
We recommend continuing to use the amounts for payroll rent and utilities.

If you have fallen behind on utilities can you use the funds to catch up or only for the portion incurred during the 8 weeks?
Yes, paid or incurred during the covered period is allowable. The loan forgiveness application states the following “An eligible nonpayroll cost must be paid during the Covered Period or incurred during the Covered Period and paid on or before the next regular billing date, even if the billing date is after the Covered Period.”

Paying Money Back/Forgiveness

We historically have funded our employer match once per year.  Do you think we can fund 1/2 the amount for Jan-Jun and have that amount forgivable?
Our recommendation is to fund include the retirement contribution and claim an amount for the payroll incurred during the eight-week period based on 8/52 of your contribution.  We are waiting further guidance.

So, if a C-corp owner works for the company and receives W2 compensation, that compensation is included in forgivable payroll costs - but not the owners’ health insurance and retirement benefits?
The owners’ health insurance and retirement benefits can count up to the $100,000 limit per owner or $15,385 for the eight-week period. See the RINA’s loan forgiveness overview.

Received loan on May 7, but paid May rent on Apr 30.  Paid June rent in beginning of June and paid July rent at the end of June.  Can 3 months of rent be forgiven?
No, since you paid May’s rent prior to the loan being funded.

We received the PPP on 4-26.  Total amount was $84,500.  No reduction in employees or pay.  Separate account was set up for the PPP money. All money has directly offset payroll dollar for dollar.  Do we still have to go through the Forgiveness application?
Yes, one must submit the application to your bank to have the loan forgiven.

Can we pay bonus to non-owners to increase forgivable amount?
Yes, as long as their annualized payroll will not exceed $100,000.

What about Fringe benefit payments in relation to Collective Bargaining Agreements employees?
Health and retirement contributions to employees under collective bargaining agreements are included in payroll costs.

If the federal COVID-19 paid sick leave is paid during the 8-week period for which tax credits are available, can you also claim them for loan forgiveness?
No, those wages should be excluded.

If you’re a member of an LLC and receive a guaranteed payment, can that be considered part of payroll/forgiveness?
Yes, up to the $100,000 annual limit.

Our stores are closed. We used to pay commissions equal to about 15% of wages. We no longer pay commission because the stores are closed. would this be considered a reduction in wages?
Our understanding is that this would not be considered a reduction in wages.

To clarify, incidental commissions do count as part of payroll, correct? Even if they are not part of the rolling 8-week payroll 2019 basis?  …for employees sub $100K?
Yes.

We have employees working from home and are reimbursing them for telephone expenses.  Are these reimbursements forgivable as utilities?
Yes, as long as they are providing you the bills for documentation.

PPP Loan Forgiveness Calculation Guidance

My question relates to whether we can claim both expenses that were actually paid (but not incurred) and expenses that are incurred (but not paid) during the 8-week period of our loan, or if we have to choose one approach over the other?
No, you can count eligible expenses that are both paid and incurred. The application states the following: “An eligible nonpayroll cost must be paid during the Covered Period or incurred during the Covered Period and paid on or before the next regular billing date, even if the billing date is after the Covered Period.“

As before, if you have a salaried employee who does not work 40 hours per week, do you calculate using hours per week. For example, a salaried employee works 25 hours a week.  Count as .5?
The salaried employee working less than 40 hours is not 1 FTE. You can count them as 25/40 or .5 under the simplified procedure.

3.    Are the company's contribution to FICA & Medicare included in Payroll costs?
No.

Timing Questions

One of the payroll period provisions seems to allow you to either use the date of disbursement and 8 weeks from that date, or alternatively to use the 8 weeks that start the next pay period after disbursement, the “Alternate Payroll Period" option: is that accurate?
We do not see the benefit of using the Alternate Payroll Period option unless your payroll is higher during that period compared. Using this method does not allow for any extra days to count as payroll, paid or incurred. See answer to next question.

I am still confused on the alternative payroll.  If my loan was funded 4/25 then my period is 4/25-6/19.  We paid a payroll on 5/8 for work dates 4/19-5/2.  Do I include this payroll or wait until the next pay period?
Yes, this payroll is included and payroll from the period 5/3 to 6/19. Therefore you are allowed the extra 6 days of payroll from 4/19 – 4/24. The loan application states the following “Payroll costs incurred but not paid during the Borrower’s last pay period of the Covered Period are eligible for forgiveness if paid on or before the next regular payroll date.” 

Self Employment

As a sole proprietor who applied for PPP funds, what documentation do I need to submit as "proof" for forgiveness for my own salary? I do not pay myself a regular bi-weekly or bi-monthly salary.
The forgiveness is based on your 2019 Schedule C income, the bank will require this documentation. You are not required to pay yourself during this period.

This content is prepared solely to provide general information to our clients and community.
This content does not constitute accounting, tax, or legal advice, nor is it intended to convey a thorough treatment of the subject matter.

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