Now that you have obtained your PPP Loan your 8-week time frame to qualify for loan forgiveness has started. We have sent you much information as it has become available, but we just wanted to reiterate some of the important points.
There are restrictions on the Uses of Loan Proceeds. These are the only authorized uses of the loan proceeds for companies with payroll/employees….
Forgivable Payroll Costs are the sum of the following:
- Salary, wages, commission, similar comp (limited to $15,385/person). This is $100,000 annualized for 8-week period. Also, Tips, dismissal or separation pay, vacation, sick, parental, family leave other than that used under Families First.
- Certain Employee benefits such as group health care benefits, retirement benefits and payment of state tax assessed on compensation of employees (SUTA).
Forgivable Covered Overhead costs that cannot exceed 25% of proceeds (mathematically 1/3 of payroll costs) are:
- Covered mortgage interest on liability of borrower and mortgage on real or personal property which was incurred before February 15, 2020.
- Covered rent obligation under a leasing agreement in force before February 15, 2020. This would include real and personal property and should include care payments for business autos.
- Covered utility payments for a service for the distribution of utilities, transportation, telephone plans and internet access for which the service began before February 15, 2020. This appears to cover fuel in business autos.
Other authorized uses of loan proceeds that do not quality for forgiveness are other interest, rent and utilities that began on or after 2/15/2020.
Sole-proprietors’ forgiveness is based on amount spent over the 8-week period used for:
- Payroll costs which is the 2019 schedule C income (capped at $100,000, prorated for 8-week period) and the above payroll costs for their employees
- Covered overhead limited to the schedule C deductibility
Partnerships’ forgiveness is based on amount spent over the 8-week period used for:
- Payroll costs based on SE income from 2019 K-1 ((capped at $100,000, prorated for 8-week period) and the above payroll costs for their employees
- Covered overhead limited to tax deductibility.
Please call us with any questions.