The IT Company would like to thank everyone who joined our webinar- PPP Forgiveness: How to Manage and Track Your Money! It was our genuine pleasure host Adam Slack and Chris Trump as they provided their expertise to our audience. As COVID-19 continually changes our world daily- we will be hosting a second webinar to discuss the next release on PPP guidance and update on Wednesday, May 13thAT 3:00 P.M. Register here to join our panel in continuing the ongoing conversation regarding PPP Loan Forgiveness!
In follow up to our webinar, we are excited to provide several resources to help aid you in this journey. Check out the full webinar, additional resources, an opportunity to reach out for additional help and answers to any submitted questions that we did not have time to answer during Q&A, below!
Fill out this form to let us know how we can help you!
We had several questions submitted that time did not allow for us to answer. Chris Trump and Adam Slack have helped us answer these questions below!
What if some of the employees are taking FMLA?
Payments made towards FMLA costs are included in “payroll costs” unless you are taking the tax credit on payments made to employees under the expanded FMLA related to COVID-19 absences as required pursuant to the first COVID-19. In determining forgiveness, you will still include them as employees in your number of employees during the 8-week period, because there hasn’t been a separation (same for employees that are furloughed but not working). I would encourage you to still pay them even if you are not required to do so under FMLA … it’s really the purpose of the CARES Act.
What if you have used 2019 information to apply and three employees have separated from the company, thereby reducing your payroll expenses during the 8-week period.
The FAQs that are being posted alongside these Q&A responses make it clear that if you fully document your offer to re-hire them and they refuse that you are not penalized in terms of determining forgiveness. However, you are correct that your payroll expenses will indeed be reduced in a manner which may make it difficult to hit the 75% threshold, and to the extent you fail to hit that mark, you will need to repay that amount to the SBA.
Interest on debt obligations is something that is a bit ambiguous, can the interest on SubDebt be included in the forgivable application?
For purposes of debt forgiveness, the payments must be for interest on indebtedness secured by real or personal property of the Borrower which existed before February 15, 2020. The fact that it is subordinated does not make the interest payments made on the debt ineligible.
What about prefunding match and profit sharing contributions for the 2020 year into an unallocated account in the plan trust? Can PPP money be used to pay contractors will 1099?
No, only for employees. Contractors can apply for PPP themselves.
Leases on Games for a Family Entertainment center, are these included in the forgivable portion if the leases were in place prior to the Feb. 15th?
The language used in the CARES Act is “rent obligated on a leasing agreement”. It does not specify leases on real property, so unless guidance comes out to the contrary, I would feel fairly comfortable including it.
What about companies with “Seasonal workers”?
The SBA has come out with guidance specific to seasonal employers respecting the calculation of the loan amount. Here is a link to that guidance: https://www.sba.gov/document/policy-guidance--ppp-interim-final-rule-seasonal-employers. No additional guidance has been provided for seasonal employers with respect to determining forgiveness – we have only what is stated in the CARES Act. In the 1106 of the CARES Act, for purposes of determining forgiveness eligibility, Seasonal Employers have the ability to compare the number of full-time equivalent employees during the 8-week period following the loan proceeds receipt to the average number of full-time equivalent employees the borrower had between February 15, 2019 and June 30, 2019.
The CARES Act states that qualifying expenses must be "incurred and paid" during the eight-week PPP forgiveness period. Retirement plan contributions for employees qualify as payroll expenses. If we have a profit-sharing contribution due in May for the 2019 plan year, will that qualify for forgiveness, since it is a payroll expense? Or will it be considered to have been incurred in 2019, so not eligible for forgiveness as part of the PPP?
Good question. I believe we will have to wait until additional guidance is issued before knowing for certain. I can make an argument that it is incurred because the amounts are “due in May” even if they related to 2019. Similar to salary and wages earned prior to the 8-week period but for which the pay date falls within the 8-week period. I feel fairly comfortable that the SBA is not going to dispute those types of payments considering the rationale behind the PPP loan program, but it’s impossible to say for certain until additional guidance is issued.
Our bank gave us a PPP Loan for our Schedule E income. Many banks denied the loan citing only Schedule C income should be used. It seems like the bank made an error- has there been guidance specifically on schedule E PPP loans? If we need to we could change the schedule E income to a schedule C as the income is borderline active/passive rental income. However, we would then pay self employment taxes on the income- but it would still be less than the PPP loan.
This seems to be an error on the bank as Schedule E income does not qualify for the PPP. You should consider turning the money back in before the May 14th deadline.
Single member LLC received PPP funds. No employees, just 1099s. Are their any guidelines specific to a business with no payroll about expenses that will be forgiven?
You can use the funds for your personal payroll (8/52 of your 2019 Schedule C net income) and the qualified expenses that are not related to payroll.
Question from client: My rent is $5,000/mth and payroll is $3,000/mth without my guaranteed payments. Even if I continue paying my employees, it will obviously not meet the 75% payroll requirement for forgiveness. How do I justify continuing to pay my employees to do nothing? Is there a way to INCLUDE my guaranteed payments as an S-Corp? Any suggestions?
They need to look at their 2019 Sch K-1 line 14a. Presumably, THAT x 8/52 = 8 weeks of “payroll” for them. If line 14a is negative, then even if they get guaranteed payments, it’s assumed they do not qualify for payroll.
Please confirm that 75% of payroll is against your forgivable loan amount not the total loan amount. I heard from one source it was vs your total loan. Based on commissions and the 10 week calc for total loan, we expect to be over and pay back some of the loan.
It is our understanding that only 25% of the total loan can be used on the non payroll related items, but you can use up to 100% on payroll. And this refers to the total loan amount. If you only spend 25% on payroll, and 25% on utilities, you can have that 50% of the loan forgiven.
We pay commissions twice a year. It does not fall in the 8 weeks of our PPP. Will they compare pay for the 8 weeks against the same 8 weeks last year or against the employees yearly take home divided by 12. Against the year/12 it pay look like I am paying them 25% less, when there base pay is actually the same.
We don’t know the rules on this yet, but we assume against a simlar 8 week period prior to the event starting.
Assuming we determine that we need to lower our loan amount based on #1. If we pay back some of the loan before May 14th, will that count as lowering the loan amount or will that just be pay back vs original loan?
If you are using the funds in good faith with how the program was designed, I would wait for guidance from you bank, even after the 14th unless regulations change in the next week.
I got in late to the meeting, so my first question is does the 8 week period start the day the money hits your account. I received mine yesterday evening.
Yes, the 8 week period begins when they money is deposited in your account.
My second question is whether water and sewage would be considered part of utilities?
Yes, it is included in utilities.
Are legal and accounting fees forgivable if are included in the under-25% part?
No, those are not included in the 25% part of the PPP forgiveness.
Thank you again to everyone who joined us! We look forward to seeing you all again during next week's follow up webinar!