Step 3: Calculate average monthly payroll costs (divide the amount from Step 2 by 12). Profit & Purpose: How Social Innovation Is Transforming ... Check out, What are the new rules for PPP loan forgiveness? We’ll provide what we think is a better approach. Total PPP loan amount = $25,000. In general, borrowers can calculate their aggregate payroll costs using data either from the previous 12 months or from the 2020 or 2019 calendar years. I'm assuming I need to keep a spreadsheet of where the funds go, correct? Thank you!!! It appears to be quite simple but it still requires you to calculate your forgiveness amount, which may mean you’ll have to consult other forms. We'd love to hear from you and encourage a lively discussion among our users. There is an optional demographic questionnaire that will help SBA and others understand who got these loans. Maybe you lost some employees permanently. In general, first- and second-time PPP borrowers may receive a loan amount of up to 2.5 times their average monthly payroll costs (with a cap per employee of $100,000 annualized) in 2019, 2020, or the year prior to the loan. All Your Worth: The Ultimate Lifetime Money Plan You must spend at least 60% of the PPP money on payroll costs. How to Calculate Payroll Costs for Your PPP Loan There is a better way. PPP Forgivable Loans Will be Unforgiving for Many If you get a second PPP loan, you must submit documentation of the 25% reduction in gross receipts. They are but a few of the groundswell of innovative organizations that have proven the power of pursuing both profit and purpose. THIS IS NOT A TREND. IT'S THE FUTURE OF BUSINESS. PPP Loan Forgiveness Resource Center - KServicing All borrowers, regardless of PPP loan amount, must use 100% of the loan for eligible expenses for PPP loan forgiveness. Check the box if the Borrower, together with its affiliates (to the extent required under SBA’s interim final rule on affiliates (85 FR 20817 (April 15, 2020)) and not waived under 15 U.S.C. You need to know the number that $54,000 is 60% of. For ABC Cookies: LINE 7. If you are a Sole Proprietorship without employees, then it becomes a whole lot easier to compute. This is exactly what I am wondering to. It seems like the emphasis here is on how you spent the funds. How to Calculate Monthly Payroll Costs for PPP Loans | OnPay I think it should be 11. Gross receipts do not include the forgiven amount of the First Draw PPP loan. Your email address will not be published. The January 2021 Interim Final Rule on Loan Forgiveness summarizes and has an extensive Q& A section that may be helpful if you have questions. Enter the loan number assigned to the PPP loan by the Lender. For example, if total eligible payroll costs are $100,000, the maximum loan forgiveness available is $166,666.67 ($100,000 / .6). The text and images in this book are in grayscale. The covered period is the time you have to spend the funds in order to qualify for forgiveness. Lender PPP Loan Number: __________________________. So I  took a sbu loan for 67000 and it's just me. This is what I was recommended to do by the loan officer for the 1st draw. The SBA guidance isn’t super specific on your question and it may be that they allow full forgiveness for sole props who use 8 weeks of compensation, but to be safe you can ask your accountant about using 11 weeks instead of 8. If not, use the full PPP form 3508 to calculate forgiveness. Note: You must submit a forgiveness application for your first PPP loan before, or at the same time, as the second draw forgiveness application is submitted. Comment document.getElementById("comment").setAttribute( "id", "a80e4798d3fcbe66c0b7dbd84eba0b3c" );document.getElementById("aee6532a7f").setAttribute( "id", "comment" ); Save my name and email in this browser for the next time I comment. Hi Cassandra – As I mentioned in the comment to Dana, hopefully Congress will pass the new PPP legislation asap and the program will open again. Q6: Can I spend all of the PPP loan proceeds on non-payroll costs? Please help us keep our site clean and protect yourself. • Eligible applicants can apply for a PPP loan, up to a maximum of $10 million, from participating lenders. This book is based on true events that journalist-turned-author Grant Olsen witnessed while traveling. All proceeds will be donated to The Umbrella Foundation to help end child trafficking in Nepal. 636(a)(36)(D)(iv)), received PPP loans with an original principal amount in excess of $2 million. 636(a)(36)(D)(iv)), received PPP loans with an original principal amount in excess of $2 million. Third, the forgiveness amount will be reduced for the following reasons: the percentage of loan proceeds spent on payroll is less than 60%, the employee count has decreased, or employees had their compensation reduced by more than 25%. This application does not make forgiveness automatic. This means that if you spend more than 40% on such non-payroll costs, the amount of your loan forgiveness will be impacted. If you are running payroll costs, your PPP loan calculation requires a few more steps. The amount of loan forgiveness can be up to the full principal amount of the loan plus accrued interest. The government will pursue recovery of loan amounts if they were knowingly used for unauthorized purposes I have a nail salon and would like to apply for a ppp program. If you took out a Paycheck Protection Program loan for $150,000 or less, the SBA instructs you to use the PPP Forgiveness Application Form 3508S when applying for forgiveness. and how do you pay yourself ??? (The lender may use an online form to apply for forgiveness.). These loans come on a first come, first serve basis. On the loan forgiveness application it says Employees at “TIME” of loan application not “On” loan application. The PPP is currently closed to new applications. Employees at Time of Loan Application: ___________. On page 3 of the application it states: “The Borrower must accurately calculate the Requested Loan Forgiveness Amount and verify the payments for the eligible costs included in it.”. and see whether you would qualify to use that form by answering the questions in the section titled “Who Can Use This Form?” If so, use this form to help you calculate your forgiveness. Now that you know that you do qualify for forgiveness even if you didn’t use 60% on payroll, you can apply. As the application explains…”It ends on a date selected by the Borrower that is at least 8 weeks following the date of loan disbursement and not more than 24 weeks after the date of loan disbursement. PPP loans less than $150,000 will only need a one-page certification form that declares your loan's total amount, the number of employees the loan helped you retain, and how much of the loan you spent on payroll costs. Attempted to reach SBA Wisconsin state office for clarity and so far no response to left voice messages or emails. It doesn’t matter if your loan was for, say, Q2 and your loss was in Q3 or Q4, but you have to show the loss in comparison to the same quarter in the previous year. Here are a few members on how easy the forgiveness process has been: “I am a tax professional here in Lake Worth, and it is true that PPP loan forgiveness is available and easily completed. Here’s how. However, borrowers are permitted to use payroll costs from either calendar year 2019 or calendar year 2020 for their First Draw PPP Loan amount calculation. How easy it will be to calculate forgiveness depends on your loan amount and other factors, such as whether employee wages and/or headcount were reduced. If you received a PPP loan, you probably have questions about forgiveness. (And no – you were not able to include 1099 contractors in payroll for PPP.). As we mentioned before, even with this simplified form, you must calculate how much of your loan is eligible for forgiveness. This change allows for greater flexibility on how to allocate the PPP funds during the newly extended 24-week Covered Period. 636(a)(36)(E). Find out in this, For more about the latest Covid relief package, see. This will determine if you used 60% of your loan for payroll costs like the Treasury and SBA require. The EZ option is available to borrowers who meet one . $50,000 and borrowers of $50,000 or less that together with their affiliates received First Draw or Second Draw PPP Loans totaling $2 million or more must adjust their “Requested Loan Forgiveness Amount” due to statutory requirements concerning reductions in either full-time equivalent employees or employee salary and wages.” If you read it carefully, this is essentially telling you whether you need to follow the calculations in the 3508EZ or 3508 forms, which we describe next. To be eligible for forgiveness in full, you have to: But what if you didn’t use the full 60% on payroll? If you are not spending the entire loan, then you have to solve for the maximum by taking payroll, dividing by 75%, and then multiplying by 25% which will then equal the maximum non-payroll amounts. For businesses in the Accommodation and Food Services sector, the maximum loan amount for a Second Draw PPP loan will be 3.5x average monthly 2019 or 2020 payroll costs up to $2 million. The amount that is forgiven will be determined by the amount the borrower spends during the eight-week covered period on payroll costs, interest, rent, and utility with no more than 25% of the loan amount spent on non-payroll costs. The same thing seems to be true of the questions on the forgiveness application: Employees at Time of Loan Application and Employees at Time of Forgiveness Application. For example, if you receive a $100,000 PPP loan, and during the covered period you spend $54,000 (54 percent) on payroll costs, the maximum amount of loan forgiveness you may receive is $90,000 (because $54,000 is 60 percent of $90,000). Also at least one of 4 quarters of 2020 will need to have gross income more than 25% less than in same quarter of 2019 - which in my case applies. You've arrived at the final step of the PPP forgiveness calculation. Count payroll costs that were both paid and incurred only once. This form has been greatly simplified. A borrower may receive forgiveness for the expenses discussed at Additional Covered Expenses only if the SBA had not remitted a forgiveness payment on the borrower's loan to the borrower's PPP lender as . From an adolescence of LSD, detention homes, probation, pregnancy, and a stillbirth in the Mexican tropics at age 15; to the peace movement in Haight-Ashbury and Washington state; to traveling by bus through Central America with a madman ... Any permitted amount not . Reviews Disclosure: The responses below are not provided or commissioned by the credit card, financing and service companies that appear on this site. The SBA, in the Interim Final Rule originally announcing this form notes that this change is likely to have a minimal impact on overall forgiveness: “There are approximately 3.57 million outstanding PPP loans of $50,000 or less, totaling approximately $62 billion of the $525 billion in PPP loans. I'm a sole proprietor with no employees. If your loan amount is less than $50,000 (and affiliates received First Draw PPP Loans or Second Draw loans of less than $2 million) do not have to calculate a reduction in forgiveness for a reduction in employee salaries or wages. Payroll costs (including eligible amounts of owner compensation) Nonpayroll costs Loan forgiveness reductions; General forgiveness process information; All information is from the SBA/Treasury FAQ first released Aug. 4 unless otherwise noted. Do you qualify for full or partial forgiveness? If you got the maximum amount then it works out closer to 11 weeks than 8 weeks (based on 2.5 times net profit or gross revenues, depending on which you used to qualify). Start by taking your gross income as reported on line 7 of a 2019 or 2020 Schedule C. You will then need to subtract any payroll costs as reported on lines 14, 19, and 26. Approximately 1.71 million PPP loans of $50,000 or less were made to businesses that reported having zero employees (presumably not counting the owner as an employee) or one employee. Economic Aid Act PPP Flexibility Act changed the Covered Period for purposes of the calculations above. Line 13: Simply enter the PPP loan amount you received from your lender. Even if you use the SBA’s online portal, we recommend you familiarize yourself with this form to understand current forgiveness requirements. Despite her parents' struggles with addiction, Lilly Dancyger always thought of her childhood as a happy one. To answer these questions, we reached out to the SBA. Businesses who received Paycheck Protection Program (PPP) loans can apply for loan forgiveness through their financial institution. A business can receive loan forgiveness on all of its payroll costs. But what’s likely to be confusing is that you still need to calculate how much of your loan is forgivable, but it’s not laid out step-by-step as with the other forms. Of course I don’t speak for the SBA so I encourage you to reference the IFR for forgiveness or reach out to your regional SBA office. Found insideThe remaining 25 percent can be spent on mortgage payments, rent and lease payments, and utility payments. Payroll expenses are capped for individuals earning over $100,000. All loan amounts used to pay for costs in these categories ... That originally meant that you had to spend at least 75% of the loan on payroll and the rest on approved expenses, but thanks to the Flexibility Act, that shifted to 60-40. Dana – We expect Congress to pas the legislation to open up PPP again any day now. Estimated amount of the loan spent on payroll costs. Note that some banks may have more specific requirements in their PPP loan . To calculate eligible payroll costs incurred or paid during the Covered Period, add Cash Compensation, Employee Benefits, and Owner Compensation, as follows: . First, I applied for 1st draw and also received 100% forgiveness. Try to keep amounts spent on non-payroll costs under 40% of the full amount spent. Each time Business X pays Employee 1, the entire payroll cost payment of $3,800 can be paid out of the PPP loan proceeds. on 'payroll costs' still applies when it eventually comes time for forgiveness. January 11, 2021. So rest assured, as long as you use it according to the rules, it will be forgiven.” —Nicholas Radice of GSB Web Design, “Forgiveness was a piece of cake. The loan proceeds are used to cover payroll costs, and most mortgage interest, rent, and utility costs over the 8 week period after the loan is made; and Employee and compensation levels are maintained. At least 60% of the covered loan amount must be used for payroll costs, but a borrower may obtain partial loan forgiveness, as long as 60 percent of the loan forgiveness amount covers payroll costs. Total Amount Spent = $36,000. In Not Just a Living, Mark Henricks explores the genesis of this cultural and social phenomenon and offers a comprehensive approach for assessing your own potential, taking the plunge, and building a business that helps you fulfill both ... I’m really needing this help and I would love to be apart of it. Determine what that new amount is 60% of to get your new max forgiveness number. However, the SBA may request information and documents to review those calculations as part of its loan review or audit . Make sure you are looking at the latest version updated January 19, 2021. forgiveness may not exceed an annual salary of $100,000, as prorated for the Covered Period. Sole proprietors with payroll costs. We are here to assist in getting  you funded, please call so we can assist you (805) 499-2200. Line 13: Simply enter the PPP loan amount you received from your lender. You'll need to show that at least 60% of the forgivable amount is attributed to eligible payroll costs, and that no more than 40% of the funds were used on other eligible non-payroll business costs. To be considered for full loan forgiveness, borrowers use at least 60% of their loan proceeds on payroll costs during the chosen Covered Period. Third, all remaining proceeds not spent on payroll costs should be spent on the three other approved costs: covered rent, covered utilities, and covered mortgage interest. Borrowers are eligible for forgiveness in an amount equal to the sum of their eligible expenses during their chosen 8-week to 24-week Covered Period.

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