SBA ISSUES LATEST RULES ON PPP LOAN FORGIVENESS

June 18, 2020 Posted by: Category: Blog No comments

Congress recently passed the payroll Protection Flexibility Act making changes to the loan forgiveness.

Today, the SBA issued new forms and the interim final rules.

You can find the new forms here:

 

The time period is increased from 8 weeks to 24 weeks.

Under the new rules, you can choose to use 8 weeks from the time you received the loan up to 24 weeks to calculate the payroll and expenses loan forgiveness.  This is called the “Covered Period”.

If your loan is not completely forgiven using 8 weeks, it would be worth calculating the 24 weeks.

 

Payroll costs changed from 75% to 65%

The new rules allow total payroll to be up to 60% of total loan forgiveness where the old rule required payroll to be 75% of total loan forgiveness.

 

Limits on self-employed and owners.

For self-employed and owners of business entities such as Corporations and Partnerships the increase in payroll, forgiveness is limited to 2.5 times monthly payroll instead of 24 weeks.  This limit was imposed due to the requirement that the PPP loan was meant principally to hire employees.

When filling out the application Owner pay goes on line 9 of PPP Schedule A.

 

Salary limited to $100,000 annual payroll

  • For all employees 8 weeks is limited to $15,385 per employee. (100,000/52*8)
  • For nonowners 24 weeks is limited to $46,154 (100,000/52*24)
  • For owners 24 weeks is limited to $20,833   (100,000/52*2.5)

The above-mentioned formulas obviously use the actual salary if below annual compensation of $100,000.

 

Fringe benefits included in the payroll cost

In addition, payroll costs include covered benefits but not for the owner such as health care, retirement, and state taxes imposed on payroll paid by the employer. (taxes such as unemployment taxes)

 

For more updates and Frequently Asked Questions, check out our COVID-19 Updates Page here.

About 

Paul Dion - Speaker, Author, and Tax Advisor - has been planning and preparing returns for business owners for over 25 years with a specialty in helping real estate agents and investors. His passion is to help business owners legally pay the least amount of tax using court-tested and IRS-approved tax strategies. In addition, he continues to advance service offerings to include income saving strategies designed to deliver higher profits to your business.