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  1. Home
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  3. PPP Loan Forgiveness FAQs

PPP Loan Forgiveness FAQs

Posted by Tim Hilligoss and Sarah Russell on August 10, 2020

Tim Hilligoss Tim Hilligoss

The COVID-19 pandemic caught many by surprise including business owners who were required to comply with forced business closures and others who experienced modified operating rules or dwindling demand. These changes were made against the backdrop of fear and concern about virus transmission that significantly altered consumer behavior. The combination of these events resulted in sharp cost-cutting measures including employee furloughs, layoffs, and terminations. In a search for much-needed capital many turned to the popular Paycheck Protection Program (PPP) due to the favorable terms and opportunity for loan forgiveness. As the SBA will begin accepting forgiveness applications from lenders on August 10 many borrowers have refocused on securing the maximum forgiveness amount possible. In addition, on August 4, the SBA released an updated version of the PPP Loan Forgiveness FAQ document. The update addresses specific forgiveness details such as FTE reductions, employee pay reductions, group healthcare costs, and more. To help clients, prospects, and others, Clayton & McKervey has provided a summary of key updates below.

PPP Loan Forgiveness FAQs

Which loan forgiveness application should sole proprietors, independent contractors, or self-employed individuals with no employees complete?

Sole proprietors, independent contractors, and self-employed individuals who had no employees at the time of the PPP loan application and did not include any employee salaries in the computation of average monthly payroll in the Borrower Application Form automatically qualify to use the Loan Forgiveness Application Form 3508EZ or lender equivalent and should complete that application.

Are payroll costs that were incurred during the Covered Period or the Alternative Payroll Covered Period but paid after the Covered Period or the Alternative Payroll Covered Period eligible for loan forgiveness?

Yes, if the payroll costs are paid on or before the next regular payroll date after the Covered Period or Alternative Payroll Covered Period.

Are payroll costs that were incurred before the Covered Period but paid during the Covered Period eligible for loan forgiveness?

Yes.

For purposes of calculating cash compensation, should borrowers use the gross amount before deductions for taxes, employee benefits payments, and similar payments, or the net amount paid to employees?

The gross amount should be used when calculating cash compensation.

What expenses for group health care benefits will be considered payroll costs eligible for loan forgiveness?

Employer expenses for employee group health care benefits that are paid or incurred by the borrower during the Covered Period or the Alternative Payroll Covered Period are eligible for forgiveness. However, payroll costs do not include expenses for group health care benefits paid by employees (or beneficiaries of the plan) either pre-tax or after tax, such as the employee share of their health care premium. Forgiveness is not provided for expenses for group health benefits accelerated from periods outside the Covered Period or Alternative Payroll Covered Period. If a borrower has an insured group health plan, insurance premiums paid or incurred during the Covered Period or Alternative Payroll Covered Period qualify as “payroll costs,” as long as the premiums are paid during the applicable period or by the next premium due date after the end of the applicable period.

Are nonpayroll costs incurred prior to the Covered Period, but paid during the Covered Period, eligible for loan forgiveness?

Yes, eligible business mortgage interest costs, eligible business rent or lease costs, and eligible business utility costs incurred prior to the Covered Period and paid during the Covered Period are eligible for forgiveness.

Are nonpayroll costs incurred during the Covered Period, but paid after the Covered Period, eligible for loan forgiveness?

Nonpayroll costs are eligible for loan forgiveness if they were 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.

Will a borrower be subject to a reduction to its forgiveness amount due to a reduction in FTE employees during the Covered Period if the borrower offered to rehire one or more laid-off employees but the employees declined?

In calculating its loan forgiveness amount, a borrower may exclude any reduction in FTE employees if the borrower is able to document in good faith the following: (1) an inability to rehire individuals who were employees of the borrower on February 15, 2020 and (2) an inability to hire similarly qualified individuals for unfilled positions on or before December 31, 2020. Borrowers are required to inform the applicable state unemployment insurance office of any employee’s rejected rehire offer within 30 days. The documents that borrowers should maintain include the written offer to rehire an individual and a written record of the offer’s rejection.

For purposes of calculating the loan forgiveness reduction required for salary/hourly wage reductions more than 25% for certain employees, are all forms of compensation included or only salaries and wages?

For purposes of calculating reductions in the loan forgiveness amount, the borrower should only consider decreases in salaries or wages

 

Contact Us

Like many other aspects of the PPP, the loan forgiveness process continues to be clarified and shaped by essential updates such as this one. It is necessary to carefully review relevant information to determine how you may be impacted. Given the complexity of loan forgiveness, it is important to work with a qualified advisor to guide you through the process. If you have questions about the information outlined above or need assistance with loan forgiveness, Clayton & McKervey can help. For additional information call us at 248-208-8860 or click here to contact us. We look forward to speaking with you soon.

Our team is always ready to help.

Please contact us for more information.

Tim Hilligoss

Tim Hilligoss

Shareholder

Contact Tim   |   Read Tim's bio

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PPP Loan Forgiveness FAQs

Posted by Tim Hilligoss on August 10, 2020

Tim Hilligoss

The COVID-19 pandemic caught many by surprise including business owners who were required to comply with forced business closures and others who experienced modified operating rules or dwindling demand. These changes were made against the backdrop of fear and concern about virus transmission that significantly altered consumer behavior. The combination of these events resulted in sharp cost-cutting measures including employee furloughs, layoffs, and terminations. In a search for much-needed capital many turned to the popular Paycheck Protection Program (PPP) due to the favorable terms and opportunity for loan forgiveness. As the SBA will begin accepting forgiveness applications from lenders on August 10 many borrowers have refocused on securing the maximum forgiveness amount possible. In addition, on August 4, the SBA released an updated version of the PPP Loan Forgiveness FAQ document. The update addresses specific forgiveness details such as FTE reductions, employee pay reductions, group healthcare costs, and more. To help clients, prospects, and others, Clayton & McKervey has provided a summary of key updates below.

PPP Loan Forgiveness FAQs

Which loan forgiveness application should sole proprietors, independent contractors, or self-employed individuals with no employees complete?

Sole proprietors, independent contractors, and self-employed individuals who had no employees at the time of the PPP loan application and did not include any employee salaries in the computation of average monthly payroll in the Borrower Application Form automatically qualify to use the Loan Forgiveness Application Form 3508EZ or lender equivalent and should complete that application.

Are payroll costs that were incurred during the Covered Period or the Alternative Payroll Covered Period but paid after the Covered Period or the Alternative Payroll Covered Period eligible for loan forgiveness?

Yes, if the payroll costs are paid on or before the next regular payroll date after the Covered Period or Alternative Payroll Covered Period.

Are payroll costs that were incurred before the Covered Period but paid during the Covered Period eligible for loan forgiveness?

Yes.

For purposes of calculating cash compensation, should borrowers use the gross amount before deductions for taxes, employee benefits payments, and similar payments, or the net amount paid to employees?

The gross amount should be used when calculating cash compensation.

What expenses for group health care benefits will be considered payroll costs eligible for loan forgiveness?

Employer expenses for employee group health care benefits that are paid or incurred by the borrower during the Covered Period or the Alternative Payroll Covered Period are eligible for forgiveness. However, payroll costs do not include expenses for group health care benefits paid by employees (or beneficiaries of the plan) either pre-tax or after tax, such as the employee share of their health care premium. Forgiveness is not provided for expenses for group health benefits accelerated from periods outside the Covered Period or Alternative Payroll Covered Period. If a borrower has an insured group health plan, insurance premiums paid or incurred during the Covered Period or Alternative Payroll Covered Period qualify as “payroll costs,” as long as the premiums are paid during the applicable period or by the next premium due date after the end of the applicable period.

Are nonpayroll costs incurred prior to the Covered Period, but paid during the Covered Period, eligible for loan forgiveness?

Yes, eligible business mortgage interest costs, eligible business rent or lease costs, and eligible business utility costs incurred prior to the Covered Period and paid during the Covered Period are eligible for forgiveness.

Are nonpayroll costs incurred during the Covered Period, but paid after the Covered Period, eligible for loan forgiveness?

Nonpayroll costs are eligible for loan forgiveness if they were 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.

Will a borrower be subject to a reduction to its forgiveness amount due to a reduction in FTE employees during the Covered Period if the borrower offered to rehire one or more laid-off employees but the employees declined?

In calculating its loan forgiveness amount, a borrower may exclude any reduction in FTE employees if the borrower is able to document in good faith the following: (1) an inability to rehire individuals who were employees of the borrower on February 15, 2020 and (2) an inability to hire similarly qualified individuals for unfilled positions on or before December 31, 2020. Borrowers are required to inform the applicable state unemployment insurance office of any employee’s rejected rehire offer within 30 days. The documents that borrowers should maintain include the written offer to rehire an individual and a written record of the offer’s rejection.

For purposes of calculating the loan forgiveness reduction required for salary/hourly wage reductions more than 25% for certain employees, are all forms of compensation included or only salaries and wages?

For purposes of calculating reductions in the loan forgiveness amount, the borrower should only consider decreases in salaries or wages

 

Contact Us

Like many other aspects of the PPP, the loan forgiveness process continues to be clarified and shaped by essential updates such as this one. It is necessary to carefully review relevant information to determine how you may be impacted. Given the complexity of loan forgiveness, it is important to work with a qualified advisor to guide you through the process. If you have questions about the information outlined above or need assistance with loan forgiveness, Clayton & McKervey can help. For additional information call us at 248-208-8860 or click here to contact us. We look forward to speaking with you soon.

Our team is always ready to help.

Please contact us for more information.

Tim Hilligoss

Shareholder

Contact Tim   |   Read Tim's bio

related news

How to Claim R&D Tax Credits

Part four of our R&D series answers two common questions about the R&D tax credit: How do I claim the R&D tax credit? Do I really need to claim the…

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IRS Issues New Guidance on PPP and Employee Retention Credit Eligibility

The IRS issued highly anticipated guidance regarding the employee retention credit (ERC) on March 1. We have previously outlined how the Consolidated Appropriations Act, passed in December, permitted employers receiving…

Read full story

Honoring International Women’s Day

In honor of International Women’s Day, I’d like to take a moment to recognize the talented women who have helped build our outstanding reputation within the business community – both…

Read full story

How to Calculate R&D Tax Credits

As we’ve seen in the first two installments of this series, business owners often miss out on the R&D tax credit opportunity and the bottom-line infusion it can provide. Many…

Read full story

Doing Business in Mexico: What to Expect this Year

Without a doubt, this year will be interesting for Mexico. To start, it’s an election year and we all know what that means…a lot of uncertainty. As the global pandemic…

Read full story

Categories

Jump directly to the topics that matter to you most.

  • A&E Professional Services
  • About Us
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  • Business Owners
  • C&M Press Releases
  • Careers
  • China Consulting
  • Clayton & McKervey
  • Client Accounting Services
  • Consulting
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  • Data Analytics
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  • Expanding Outside the U.S.
  • Expanding to the U.S.
  • From the President
  • Industrial Automation
  • International
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  • Mexico Consulting
  • Podcasts
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Authors

Read news direct from our managers and stakeholders.

  • Ben Smith
  • Beth Butchart
  • Bryan Powrozek
  • Carlos Calderon
  • Casey Haggerty
  • Clayton & McKervey
  • Dave Van Damme
  • Denise Asker
  • Eric Lin
  • Jim Biehl
  • Julie Killian
  • Kevin Johns
  • Margaret Amsden
  • Miroslav Georgiev
  • Nina Wang
  • Rob Dutkiewicz
  • Ruben Ramirez
  • Sarah Russell
  • Sue Tuson
  • Tarah Ablett
  • Teresa Gordon
  • Tim Finerty
  • Tim Hilligoss
  • Wendy Reedy

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Additional news from Clayton & McKervey can be found below.

  • Subscribe to our email newsletter
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