We are awaiting further clarification from the SBA. This figure would be much more illustrative of how the PPP loan program is proceeding. Under the CARES Act, employers can choose between two lookback periods: either February 15, 2019 to June 30, 2019; or January 1, 2020 to February 29, 2020. The lending program uses a streamlined, low-documentation process and does not require collateral. The PPPFA makes PPP loans more flexible in how and when theyâre used. The form will still have to be finalized for other tax purposes. By now most small business owners know that the CARES Act, through the Small Business Administration (SBA), offers financial relief through two targeted â¦ Hi Angela, contractors are not eligible for the program, as they can separately apply for funding under the program. PPP is listed in the World's largest and most authoritative dictionary database of abbreviations and acronyms The Free Dictionary Any small business with 500 or fewer employees may be eligible. Please look for them carefully. For the average payroll calculation. We recommend you continue to review the SBA site for the most up to date information, and consult with legal or tax advisors for specific advice. The fixed interest rate was changed to 1% it is not 0.5% as your article currently states. However, if you, your PPP lender or CPA prefer to exclude them – you may choose to do so when running your report. For reference, you can look at page 12 of the CARES Act legislation where it’s made clear that chapter 21,22,24 taxes are not included in the max loan calculation while page 11 makes it clear that state taxes are included. For PPP we have found 500 definitions. Apply now for a PPP loan. The new legislation eliminates this requirement, meaning a PPP borrower who also receives an EIDL grant does not need to reduce their potential PPP loan forgiveness amount. It’s not in our Gusto report because we have given it much consideration and feel confident in our calculation (going with a higher potentially non-allowed number could also put the client in danger for not spending the forgivable amount and being left with a loan after the 8 weeks). The Final SBA Rule on implementation of the PPP provides: “[l]oans guaranteed under the Paycheck Protection Program (PPP) will be 100 percent guaranteed by SBA, and the full principal amount of the loans may qualify for loan forgiveness.” Therefore, participating banks do not stand to lose on making PPP loans. Hi Gerald, we hear you and share your concern. Hi Tawnya — thanks for pointing this out!  Under the CARES Act, and confirmed by guidance from the SBA and US Treasury, “payroll costs” are: salary, wages, cash tips or equivalents, payment for regular leaves of absence, dismissal or separation compensation, group health insurance payments, retirement benefits payments, and some state/local payroll taxes. That eliminates a lot of the smallest businesses in the country. During the lookback period, Widgets had 50 average monthly full-time employees. We expect to have them back up at 11:30am PT. It includes employee-paid State and Federal Taxes and employee-paid Benefits Contributions. Thanks for all of your work to keep us updated on the CARES Act and PPP — very much appreciated. The governmentâs efforts to help businesses have resulted in generous terms for PPP loans. Total payments for payroll may be forgivable. In March 2019, I had 3 employees. A list of approved lenders can be found on the SBA website. Just as PPP loan applications were funneled to the SBA through borrowers’ banks, so are the applications for loan forgiveness, said attorney David Roth of Munsch Hardt Kopf & Harr P.C. What if I employee all contact employees that are 1099’d. How long is my PPP loan number/What does my PPP number look like? If they do, the forgiven amount will be reduced. For borrowers applying for an increase in their First Draw PPP Loan, the period used for calculating monthly payroll costs for the initial application will be used to determine borrowing capacity. I used gusto to do this last year, but the amounts are not shown in my eligibility. Applying for the PPP and How Much Can Be Borrowed. Can part time employees wages be covered? Only expenses that businesses incur … Using your example with two employees with $150K annual salaries, only the $100K ($50K x 2) would be excluded from the loan eligibility calculation. I ran the Gusto COVID report and it looks like they are taking total Gross Wages, less all taxes withheld and then adding back state taxes. Paycheck Protection Program Loan Frequently Asked Questions . Bear with us, there’s a lot to cover here. ... More Businesses Stand to Benefit From the ERC — Here’s Why Feb 4, 2021. There are no requirements for collateral or personal guarantees. An SBA-backed loan that helps businesses keep their workforce employed during the Coronavirus (COVID-19) crisis. For example, if your monthly average payroll (excluding compensation in excess of $100,000 salaries) in the last 12 months is $10,000, you may borrow up to $25,000. Unless you are a seasonal business or weren’t in business (and paying employees) on or before February 15, 2020, your pay period should be 12 months from the report date. We have updated our calculator and contractor payments have been removed from the report. Are you limited to $100K of payroll costs per employee, or $100K of salary per employee? Number of employees when applying for the PPP? PPP: Premium Personal Password (Muzi) PPP: Public Player Program (golf initiative; Canada) PPP: Penultimate Profit Prospect: PPP: Product Protection Plan: PPP: Pre-Authorized Payment Plan: PPP: Pink Paula Pack (Firefox theme) PPP: Product Planning Process (project management) PPP: Perfect Prom Project: PPP: Pälkäneen Putki Ja Puhallin: PPP About the Author. If your business is seasonal, you can base your monthly averages on numbers from February 15, 2019 or March 1, 2019 to June 30, 2019. For more details, read here. And, if qualifying employers generally donât lay off employees or cut wages, the loans can be forgiven, effectively making them full or partial grants, depending on how borrowers put the proceeds to use. Startups, by definition, tend to have far fewer than 500 employees. Please check your email for the latest information. The custom timeline payroll report I downloaded does not compute this easily at all. Thereâs no pre-payment penalty. Hi Courtney — based on new guidance, Gusto has updated our PPP report to allow customers the flexibility to customize their date range, as well as choose whether or not they want federal taxes to be included in the calculation of Payroll Costs. We understand you’re a trusted advisor to your clients. Previous guidance indicates that PPP loans originating before June 5, 2020, have a two-year term, unless the lender and borrower mutually agree to extend the maturity of such loans to five years. Details on the size standards and exceptions are on the SBA website. Primarily, it gives borrowers 24 weeks (instead of eight weeks) to spend the money and allows them to use up to 40% (rather than 25%) on non-payroll costs such as rent and utilities. Here’s where small businesses stand. Borrowers will have their loans forgiven if they use the money for designated expenses. Would I ultimately have to repay this loan? This rollout is designed to help business owners who couldn’t get a PPP loan before. One reason was the fact that the loan provided funds to cover payroll for only eight weeks. Example I am looking at the report and don’t understand why you take out the EE federal taxes. This doesn’t seem right to me. Using the same example: The SBA has issued a new interim final rule that allows PPP lenders to increase existing PPP loans to partnerships or seasonal employers to include appropriate amounts to cover partner compensation. They are also removed for calculating forgiveness during the forgiveness period as far as we can tell. We’re a growing firm that’s only 2 years old and our last two months payroll average is way higher than the previous 1 year average. Employers who already let workers go have until December 31 to restaff. …and (2) will amounts paid to these independent contractors from the proceeds of the loan be included in the “forgiven” portion of the debt? Hello Suzanne, employers can not include independent or business contractors in their calculations for a PPP loan. We recommend you continue to check for updates. … where on the PPP application do i add the current amount of my SBA loan??? The end of the 90-day period does not necessarily mean the SBA will not consider an audit/review of a borrowers’ application in the future, so be prepared should they need to access such documentation. Let’s imagine you only have 1 employee, who gets paid $150K/yr. This includes small businesses, S corporations, C corporations, LLCs, private nonprofits, faith-based organizations, tribal groups and veteran groups. Note that many lenders are limiting eligibility to those businesses with whom they have a pre-existing relationship, such as previous loans or a business checking account. Widgets is eligible for $500,000 in loan forgiveness [(25 / 50) x $1,000,000]. Before, covered expenses had to be incurred over the eight weeks right after loan disbursement. those who receive a 1099), Credits received as a result of the Families First Act for sick leave or FMLA, Interest rates for these loans will have a fixed rate interest of 1%. See: https://www.sba.gov/document/policy-guidance–ppp-interim-final-rule for more information. ; What does PPP mean? This would be an IMMENSE help to make sure we get all the rules right, including calculating for employees paid more than $100K. We have strictly interpreted employee payroll costs as wages, benefits, etc paid to employees (ie folks on staff), but we noticed that Gusto’s PPP Report includes the cost of contractor pay. The loan amounts for a vast majority of borrowers will be almost identical to what the borrower received for their original PPP loan. Thank you for subscribing! For example, if today is April 2nd, we’d recommend that you select a period of April 1, 2019 – March 31, 2020. Second Draw loan alternative: Expand your current PPP loan If you don’t qualify for a Second Draw loan but received a PPP loan, your business could still get more funding through this program. Our spreadsheet will be updated in real time with the latest information we have. Hi David, based on the latest guidance from the AICPA, we’ve updated our PPP reports to allow customers the flexibility to customize their date range, as well as choose whether or not they want federal taxes to be included in the calculation of Payroll Costs. In addition, the legislation would treat EIDL advances, as well as SBA 7(a) loan subsidies, similar to PPP forgiveness—i.e., the advances and subsidies would not produce taxable income and related … Is it Withholding, FICA and Medicare withheld? The number of full-time employees and pay rates for the lookback period including. For reference, you can look at page 12 of the CARES Act legislation where it’s made clear that chapter 21,22,24 taxes are not included in the max loan calculation while page 11 makes it clear that state taxes are included. Ergo, Widgets, Inc. could borrow $2.5 million under the Paycheck Protection Program. Are you using the term “covered period” two different ways? It does not include employer-paid Federal Taxes or State Taxes. The remaining $5,000 of the PPP loan may be retained by the borrower but must be repaid under the terms of the PPP (or repaid immediately if the borrower would rather not retain the funds as a loan). We’ll be making live updates to this article based on that guidance, with the most recent appearing first, and technical corrections appearing in the body of the post. It includes employee-paid State and Federal Taxes and employee-paid Benefits Contributions. When calculating payroll cost – the amounts include just wages paid to employees only or subcontractors also? The treasury instructions don’t say to deduct EE taxes. Independent contractors can apply for PPP starting on April 10. As part of the CARES Act signed into law in late March, the government set aside $349 billion for what the legislation calls the Paycheck Protection Program (PPP) that is run by the Small Business Administration (SBA), with an additional $310 billion added in late April. approved or pending approval for a SBA loan, and. Yes, the definition of “payroll costs” is the same for both loan amount and loan forgiveness in the SBA’s interim final rule published April 2. PPP stand for Paycheck Protection Program. The Paycheck Protection Program (PPP) loan and Economic Injury Disaster Loan (EIDL) both have low interest rates and portions that may not need to be repaid. If forgiveness is denied in whole or in part and if the PPP borrower does not timely request SBA review or the SBA declines the request for review, the lender is responsible for notifying the PPP borrower of the date on which the borrower's first amortizing payment of the unforgiven portion of the PPP loan plus any accrued interest is due. If Widgets, Inc. paid $1,000,000 gross and withheld $120,000 FICA from employees, then paid $240,000 in FICA (both employee and employer portion) shouldn’t Widgets be eligible for the full $1,000,000 (but not $1,120,000 which would include the employer portion)? Would that count as an affiliation? Recent guidance from the Small Business Administration has clarified the eligibility of certain businesses for the Paycheck Protection Program. Applications have slowed down compared to the first round, but the program is first-come, first-served. As noted at the top of this article, the new deadline is August 8. Gusto has implemented the salary cap by counting all Earnings of highly compensated employees each month until each highly compensated employee has received $100k in annualized pay. You can learn more about our changes here: https://support.gusto.com/1840352911/Paycheck-Protection-Program-Report.htm. A requirement that borrowers also have credit elsewhere is likewise being waived for this program. The Paycheck Protection Program has been replenished with $320 billion. The IRS will not treat PPP loan forgiveness as taxable income. I do have a question and, thus far, I have been unable to locate anything specific regarding my question. Each employee that on average, worked more than 40 hours a week during the particular calculation period, counts as one FTE. For the report period, the employee only made $20.8k (2 months of pay). How do I calculate my monthly rate in this scenario? It includes employee-paid State and Federal Taxes and employee-paid Benefits Contributions. Gusto removed federal taxes when calculating the loan max. What is the number of employees you put on the application? The most Widgets could borrow would be the lesser of: $2,479,167 [($1,000,000 – [$100,000/12]) x 2.5] or $10 million. PPP Loan Forgiveness. A third round of Paycheck Protection Program (PPP) loans was authorized by the passage of H.R. As of the end of August 8, it still had roughly $134 billion left to give out in loans, however. Regulations and guidance from the SBA and the U.S. Department of the Treasury on the PPP are evolving rapidly and â¦ It provides valuable relief â¦ Introducing no-cost, low-cost, and premium employee benefits. Exceptions for maintaining head counts will be made if you canât rehire the people you let go and you cannot find qualified replacements. Self-employed individuals who file an IRS Schedule C with their Form 1040, such as independent contractors and sole proprietors, are also eligible. That said, the SBA has subsequently issued new guidance intended to close the PPP program to companies that can raise capital. Hi Moses, jobs are all active employees. Applying for the PPP loan was designed to be a straightforward process. However, you can use your loan funds to pay eligible payroll expenses, including those of your additional employees, and those expenses will be eligible for forgiveness. 501(c)(3) of the Internal Revenue Code than it is eligible. For starters, there will be limits to what a business can borrow. So a small business that has employees as well as various 1099 service providers…can include in the calculation of “payroll costs” as payments to 1099s that were reported to the IRS…for both purposes of the loan amount, as well as forgiveness? If I pay an employee $5k per month compensation, that’s the cost, regardless of how much they pay in taxes. What does the hiring situation in the U.S. look like as we enter the new year? Bills Use your credit card to pay any business, even where cards are not accepted. The amount forgiven cannot be greater than the loan principal; It will be proportionately reduced by a decrease in headcount or wages compared to an earlier lookback period. Hi Sigrid, thanks for your question. This was especially the case if most of their workers are minimum wage or close to it, since the CARES Act that created the PPP also authorized a $600-per-week boost to unemployment benefits. 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