Employee’s hazard pay and Bonuses – Good News here!
Employee’s hazard pay and bonuses are eligible for PPP loan forgiveness. There is no guidance as to the amounts at this time. Please keep in mind, if the employee salary is already at $100,000+ annualized, the bonus paid to this employee will not help with Loan Forgiveness.
Retirement or health insurance contributions
No additional PPP Loan Forgiveness for retirement or health insurance contributions for self-employed individuals, including Schedule C filers and general partners. Your PPP Loan Forgiveness is limited to the $100,000 annual computation.
Payroll Costs Eligible for PPP Loan Forgiveness
When must payroll costs be incurred and/or paid to be eligible for forgiveness?
Payroll costs paid or incurred during the eight consecutive week (56 days) covered period are eligible for PPP Loan Forgiveness. You can choose one of two periods:
- the date you received your PPP loan proceeds from your Bank (i.e., the start of the covered period);or
- the first day of your first payroll cycle in the covered period (the “alternative payroll covered period”).
Example: You compensate your employees on a bi-weekly payroll basis (every other week). Let’s assume your eight-week covered period begins on June 1 and ends on July 26. The 1st day of your first payroll cycle that starts in the covered period is June 7. You may elect an alternative payroll covered period for payroll cost purposes that starts on June 7 and ends 55 days later (for a total of 56 days) on August 1. Payroll costs paid during this alternative payroll covered period are eligible for forgiveness. Also, payroll costs incurred during this alternative payroll covered period are eligible for forgiveness as long as they are paid on or before the first regular payroll date occurring after August 1.
Nonpayroll Costs Eligible for PPP Loan Forgiveness
When must nonpayroll costs (Rent, Utilities & Mortgage Interest) be incurred and /or paid to be eligible for forgiveness?
A nonpayroll cost is eligible for forgiveness if it was:
- paid during the covered period; or
- incurred during the covered period and paid on or before the next regular billing date, even if the billing date is after the covered period.
Example: Let’s assume your covered period begins on June 1 and ends on July 26. You pay your May and June electricity bill during the covered period and you pay your July electricity bill on August 10, which is the next regular billing date. You may seek loan forgiveness for your May and June electricity bills, because they were paid during the covered period. In addition, you may seek loan forgiveness for the portion of your July electricity bill through July 26 (the end of the covered period), because it was incurred during the covered period and paid on the next regular billing date. Please maintain copies of invoices and canceled checks so we will have them when we file for PPP Loan Forgiveness.
Will a borrower’s loan forgiveness amount be reduced if the borrower laid-off or reduced the hours of an employee, then offered to rehire the same employee for the same salary and same number of hours, or restore the reduction in hours, but the employee declined the offer?
No. If you offered to rehire your employees, you are generally exempt from the PPP Loan Forgiveness reduction calculation. Here are the requirements:
- you made a good faith, written offer to rehire such employee (or, if applicable, restore the reduced hours of such employee) during the covered period or the alternative payroll covered period;
- the offer was for the same salary or wages and same number of hours as earned by such employee in the last pay period prior to the separation or reduction in hours;
iii. the offer was rejected by such employee;
- the borrower has maintained records documenting the offer and its rejection; and
- the borrower informed the applicable state unemployment insurance office of such employee’s rejected offer of reemployment within 30 days of the employee’s rejection of the offer. Further information regarding how you will report information concerning rejected rehire offers to state unemployment insurance offices will be provided on SBA’s website.
Will a borrower’s loan forgiveness amount be reduced if an employee is fired for cause, voluntarily resigns, or voluntarily requests a schedule reduction?
No. When an employee of the borrower is fired for cause, voluntarily resigns, or voluntarily requests a reduced schedule during the covered period or the alternative payroll covered period , the client may count such employee at the same full-time equivalency level before the FTE reduction event.
Loan Forgiveness – Documentation Requirements What must borrowers submit for forgiveness of their PPP loans?
The loan forgiveness application form details the documentation requirements; specifically, documentation each borrower must submit with its Loan Forgiveness Application (SBA Form #3508), documentation each borrower is required to maintain and make available upon request, and documentation each borrower may voluntarily submit with its loan forgiveness application. Please be sure to maintain all payroll reports, along with invoices and canceled checks during your covered period.
When is your SBA Loan Forgiveness Form Due?
You have until October 31, 2020 to file your SBA Loan Forgiveness Form. The lender has 60 days from receipt of a complete application to issue a decision to SBA.
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