May 19, 2020
Over the weekend the SBA issued the PPP Loan Forgiveness Application. The form and instructions are very informative, but additional clarification is needed, and we hope to receive more soon.
Here is what we found notable from the SBA form and instructions:
- Full Time Equivalent is calculated based on a 40-hour week, and the simplified method for calculating those working less than 40 hours a week is to assume they count as .50 FTE.
- Borrowers with biweekly (or more frequent) payroll may elect an Alternative Payroll Covered Period that will include 8 weeks of payroll. That does not include semi-monthly payroll, so still make sure all payroll gets included in the 8 week period if that’s how often you pay people.
- Mortgage interest and rentals cover personal property and real property.
- If a borrower does not spend 75% of the loan on Eligible Payroll Costs, there is still partial loan forgiveness available.
- Pay attention to amounts paid to owners. The maximum payroll to include in the forgiveness calculation is the lesser of $15,385 or 8 weeks of the average 2019 compensation.
- FTE Reduction Exceptions include voluntary resignations and hour reductions along with employees fired for cause or who declined to be re-hired.
- The FTE Reduction Safe harbor compares head count on February 15, 2020 to June 30, 2020.
We believe all borrowers should review the new SBA PPP Loan Forgiveness form and instructions thoroughly. Included is guidance on what documentation will need to be attached to the forms. As payments are made, we suggest assembling the documentation so that the application for forgiveness can be processed as woon as possible after the 8 weeks is up. If you need assistance in getting all of this filled out, we are here to help.
As this evolves, we will do our best to keep you up to date on items that affect you and your business.
theKFORDgroup team is ready to assist you with your tax questions. Give us a call at (210)340-8351.