The Paycheck Protection Program begins phase 2: forgiveness! On Friday evening, May 15, the SBA released the PPP Forgiveness Application, with a notable absence of guidance from the treasury. The form and instructions offer borrowers details on how to apply for forgiveness of their PPP loans, and additional guidance such as FAQs and interim final rules including:
- Flexibility to include eligible payroll and non-payroll expenses paid or incurred during the eight-week period after receiving their PPP loan. (Form instructions state that non-payroll expenses that are incurred during covered period must be paid by the next billing cycle to be included.)
- Implementation of statutory exemptions from loan forgiveness reduction based on rehiring by June 30.
Onto the Biggest Changes from Friday’s announcement:
- Borrowers can elect to begin the first day of the first pay period following loan disbursement as the beginning date of loan coverage. (This won’t impact overall loan forgiveness regarding costs incurred or payments made.)
- Only employee related non-cash compensation paid by the employer. (health insurance, retirement benefits, employer paid state/local unemployment taxes)
- Owner’s compensation in Payroll Costs is the lesser of $15,385 or the 8-week equivalent of their 2019 compensation
- Forgiveness is limited to principal amount only
In addition to the application pages, record keeping items needing to be submitted with your application are:
- Payroll reports from your payroll provider.
- Payroll tax filings (Form 941)
- Income, payroll, and unemployment insurance filings from your state.
- Documents verifying any retirement and health insurance contributions.
The CARES Act affects more than just payroll. Read over to our blog updates 1, 2, 3, 4, 5, 6, Still in need of step-by-step instructions on how to perform the calculations required by the CARES Act to confirm eligibility for loan forgiveness? Head over to Ark Academy for your crash course.
For more immediate assistance, connect with us.