Great news! More guidance has been released this week regarding PPP Loan forgiveness.
The AICPA (Association of International Certified Professional Accountants) released a concise summary of the information:
- Interim Final Rule on Additional Revisions to First Interim Final Rule (6/12/2020)
- The original First Interim Final Rule (IFR) disqualified an applicant if an owner of 20% or more had been convicted of a felony within the last five years.
- This revision reduced the requirement to one year for felonies that do not include fraud, bribery, embezzlement, or a false statement in a loan application or an application for federal financial assistance.
- Interim Final Rule on Revisions to the Third and Sixth Interim Final Rules (6/17/2020)
- Updated to reflect the PPP Flexibility Act
- Covered period updated to 24 weeks
- 60% to be spent on payroll costs
- Eligible payroll costs per employee
- Capped at $46,154 for 24-week covered period borrowers
- Remains capped at $15,385 for 8-week covered period borrowers
- Owner Compensation Replacement
- Capped at the lesser of $20,833 or 2.5 months’ worth of 2019 net profit for 24-week covered period borrowers
- $100k / 12 months * 2.5 months = $20,833
- Remains capped at $15,385 for 8-week covered period borrowers
- Note: Instructions to loan forgiveness application indicate all owners are capped at these amounts (including S Corp and C Corp owners)
- An EZ Loan Forgiveness Application is available
- Applies to borrowers that
- Are self-employed and have no employees; OR
- Did not reduce the salaries or wages of employees by more than 25%, and did not reduce the number or hours of employees; OR
- Experienced reduction in business activity as a result of health directives related to COVID-19, and did not reduce the salaries or wages of employees by more than 25%.
- A simplified one-page form plus certifications and representations
- Requires fewer calculations
- Documentation still required to be submitted / maintained including full time employees at 1/1/2020 and end of covered period
- The full Loan Forgiveness Application has been revised
- A borrower can choose an 8 or 24 week covered period if loan funds were received prior to June 5
- New certifications regarding FTE reduction safe harbor related to operating restrictions
- Non-cash compensation costs clarified to “paid or incurred”
- FTE and salary/hourly wage calculation for reduction are basically the same
- Health insurance for S Corp owners, self-employed, and general partners is not allowed
- Retirement contributions for S Corp owners is allowed. It is not allowed for self-employed and general partners.
Please reach out to us if you have any questions on how to maximize forgiveness. We can help determine whether to elect for an 8 week or 24 week covered period. We are also available to track expenses and complete the Forgiveness Application.
