How do I get forgiveness on the PPP loan?

Recently, the PPP loans have been kind of “a big deal”, and have been one of the main questions asked of me, and I’ve been researching constantly. I have been in bookkeeping groups and accounting groups, and, honestly, the scene changes every single day.

Originally, in order to get the PPP loan, you calculated two and a half months or 10 weeks worth of payroll, you gave that information to the lender, and the lender lent you money based on that. You had eight weeks to spend it, and you had to spend 75% of it on payroll and 25% on a rent or mortgage, or utilities, in order to get it forgiven (a grant, not a loan). 

Most businesses, however, were not going to be able to spend that money fast enough on those items in order to be able to get the debt forgiven, so a new bill was approved.  Now, businesses have much longer to spend the funds:  24 weeks. And only 60% has to be spent on payroll, and 40% on rent, mortgage, or utilities. A welcome change for many companies.

There are other rules on the PPP loan today.  You have to track the loan in the same way as when you initially applied for the loan, which was that employees with a salary over one hundred thousand a year, you had to use one-hundred thousand. You take that salary, divide it by 52 weeks for the year to find out what the weekly amount is.  That is the only part of the salary for that person that is going to be forgiven. And employer payroll taxes are not forgiven as part of the PPP loan.

Several other points:

You must maintain the number of employees on your payroll. (There are some exemptions to this, such as employees not wishing to be rehired, or if an employee was fired for cause.)

You must maintain at least 75% of the total salary.

You have 10 months after the covered period to apply for forgiveness, but you can apply as soon as the funds are spent or the covered period is over. We are still waiting for the banks and legislators to finalize the forgiveness application form.

QuickBooks Online offers a simple free report if you use QuickBooks Online Payroll, which calculates how much is forgivable. If you don’t have QuickBooks Online, some payroll systems have a great report, some don’t, but you could ask your bookkeeper to create a spreadsheet to show that data so you can see how much you’ve spent that is forgivable as part of the PPP loan. 

Given the right setup, when we get information from the banks and the forms to fill out to apply for the loan forgiveness, we will have all our records straight so those forms can be promptly and correctly completed and submitted.

As of right now, banks are lobbying to streamline the process and get blanket forgiveness, instead of having so many rules, as yet, not approved as of yet – but tomorrow could bring something new.

[Note: Much more data exists on this subject, feel free to email me any specific questions]

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Sincerely,
Maya Weinreb | Founder & CEO
813-336-1574

Frequently Asked Questions

How does PPP loan forgiveness work?

PPP loan forgiveness allows eligible businesses to have some or all of their PPP loan balance forgiven if they meet program requirements. Businesses generally needed to use the funds for eligible expenses, including payroll costs and certain operating expenses, during the covered period.

How much of a PPP loan had to be spent on payroll?

PPP rules changed over time. Under the updated requirements, businesses generally needed to spend at least 60% of the loan on eligible payroll costs to qualify for full forgiveness, with the remaining funds allowed for other eligible expenses such as rent, mortgage interest, and utilities.

How long did businesses have to use PPP loan funds?

The covered period for PPP loan spending was extended from the original eight weeks to up to 24 weeks for many borrowers. Businesses could apply for forgiveness after using the funds or after the covered period ended.

What payroll costs qualify for PPP loan forgiveness?

Eligible payroll costs generally include employee wages, subject to certain limits. For employees earning more than $100,000 annually, only the equivalent portion up to the applicable limit could be considered for forgiveness. Employer payroll taxes were not included as forgiven payroll costs.

Do businesses need to maintain employees for PPP loan forgiveness?

Yes. Businesses generally needed to maintain employee headcount and avoid significant reductions in wages to qualify for full forgiveness. Certain exceptions applied, such as employees who declined offers to return to work or specific circumstances allowed under PPP rules.

How should businesses track PPP loan forgiveness expenses?

Businesses should maintain detailed records of payroll costs and other eligible expenses related to PPP funds. Bookkeeping software, payroll reports, and organized documentation can help ensure accurate forgiveness calculations and a smoother application process.