Frequently Asked Questions About PPP Loan Forgiveness

A: PPP loans can be audited for up to six years after the loan is paid off or when loan forgiveness is granted, whichever is later. For example, if the full amount of PPP funds is forgiven, the audit timeframe is six years from the point that the lender issues the loan forgiveness letter. If any amount of PPP funds is converted into a two-year (or five-year) loan, then the record retention period is six years from the point that the entire loan is paid off.

A: Talk to an attorney. This hasn’t been covered in any existing guidance yet, but the thinking is that whoever owns the entity, owns the liability. However, in the case of a stock sale, liability could be shifted. But again, there’s nothing concrete about this yet. 

A: There are some considerations whether bonuses meet eligible payroll expenses, and the general answer is yes. Bonuses can potentially be given to hourly employees, perhaps at a multiple of their regular rate at five or ten hours, or bonuses can be given to owner employees, with exceptions. Business owners struggling to utilize the payroll portion of PPP funds can look at a few different options depending on their individual circumstances.

A: Yes. But the bonuses must fall under the $15,385 threshold or the lesser of your annualized wages for that eight-week period. If the wages don’t exceed that threshold even once the bonus is paid, then it is an allowable payroll expense.

A: At this point, no. If an individual holds any stake in the business, he or she is an owner employee. There has been no guidance on an associative rule for ownership currently.

A: No; only gross wages would be considered.

A: Yes. Businesses can claim the employer’s portion of healthcare and retirement contributions as allowable payroll expenses.

A: When the SBA modified the language to say paid “or” incurred, versus paid “and” incurred, they gave borrowers additional flexibility in how to use the loan proceeds. For example, businesses no longer need to run a special payroll, as long as employees worked those hours within the covered period and are paid on their next regularly scheduled payroll. This would eliminate the need to shift to an alternate payroll period.

A: No, because the distributions aren’t running through payroll.

A: No.

A: Essentially, the simplified FTE count would reduce the number of FTEs required to be on the payroll. If you already received the loan proceeds, then that portion – calculating FTEs – is done, except that you want to make sure your FTEs are back at pre-COVID-19 capacity at the end of the covered period. However, if you calculated your FTEs based on a good faith estimate, you’ll be fined, and the forgiveness portion will be considered completely separate.

A: No. The only time you’re looking at 2019 payroll numbers is if you are an owner employee. There’s a limitation there. You’re also looking at whether you reduced someone’s wages from the prior year or prior period. If you reduce someone’s wages by more than 25%, there is a limitation. But if it’s a totally new employee, that wouldn’t count because you’re not reducing wages at that point.  

A: Use the FTE calculation for seasonal employees and compare that with the other two options for look-back periods. Finding the lowest FTE baseline should help to calculate the number of employees that should be back on payroll by the end of the covered period to still qualify for loan forgiveness.

A: Yes. There are three options. The first is if you’re a seasonal employer; in that case, contact your ABBB representative for guidance. The other two options for regular employers are to use either February 15, 2019, through June 30, 2019, OR January 1, 2020, through February 29, 2020.

A: The law defines a full-time workweek as 40 hours. The FTE calc for loan forgiveness will not involve how the employer defines full-time for their benefits.

A: Generally, no, because there is a limitation based upon self-employment income that you’re limited to your self-employed income. Guidance further states that health insurance and retirement are included in self-employment and therefore ineligible for loan forgiveness. If the LLC is taxed as an S-Corp, then the answer is yes.

A: Businesses that have completely used all of their PPP funds and are ready to file for loan forgiveness can go ahead and get the forgiveness application going once an updated application is provided by SBA. Businesses that have not used all of their PPP funds on eligible expenses should wait, given the extension.

A: Yes, dollar for dollar, unless the EIDL grant was converted to a loan. 

A: This can be interpreted in different ways. Our viewpoint does not assume transportation costs, whether gas, vehicle expenses, and so forth, are a sure thing. Use the PPP loan for other qualified non-payroll expenses first. Since the guidance is vague on this point, if you do use PPP funds for transportation costs, go ahead and submit them in the loan forgiveness application. The worst that can happen is that they don’t get forgiven.

A: No, semi-monthly or monthly payrolls are not allowed under alternate payroll. It would need to be bi-weekly or weekly.

A: Yes. Remember that insurance is separate from an employee owner’s limitation calculation for pass-through entities. Use Box 3 calculation from 2019 for your limitation on wages.

A: You can visit the SBA here, get a copy from your lender, or let us know and we will get you a copy.

More information about coronavirus business resources and strategy can be found on our COVID-19 Resource Center webpage.