How do I qualify for PPP loan forgiveness?

PPP loan forgiveness

Businesses all over the nation have applied for the Paycheck Protection Program (PPP) loan. With many businesses now receiving the PPP loan, the next responsible question is:

How do I qualify for PPP loan forgiveness?

We have compiled the answers in an easy-to-read format which allows you to know which expenses qualify and are eligible for forgiveness.

The following areas are allowable for forgiveness within the PPP loan:

  • Payroll costs, including additional wages for tipped employees
    • Salary, wages, commissions, and tips which are capped at a total of $100,000 and prorated to the eight-week period for each employee
    • Paid time off (PTO) and leave which include all types of leave such as vacation, parental, family, medical and/or sick unless you are using credits from the FFCRA
    • Health care benefits
      • Health insurance plans
      • Dental and vision plans
      • Health FSAs
      • HRAs, but not QUSEHRA
    • State and local taxes, except for the employer’s share of FICA, RRTA, or federal income taxes reported on the form 941
  • Additional non-payroll costs that only 25% of your loan can be used for, IF you want the full loan amount to be forgiven include:
    • Interest for mortgages and certain debt
    • Business rent
    • Business utility costs

Useful tips to know for FULL loan forgiveness:

  • On mortgages, certain debt and rent, these agreements must have been signed prior to February 15, 2020.
  • Only 25% of your loan amount can be used for non-payroll costs under the category listed above.
  • You must maintain your employee headcount and compensation levels between February 15, 2020 and the end of the 8-week period following loan disbursement. If you have reduced your workforce or reduced compensation, you have until June 30, 2020 to rehire and restore salaries, otherwise your forgiveness amount is reduced.
  • The government is updating the forgiveness process weekly, so check regularly for updates.
  • For tipped employees, you can pay wages to cover what they would normally have earned in tips and have them forgiven.

You can use your funds in the PPP loan for expenses not on this list, but please note that the amount used will not be forgiven.

When you are turning in your application for loan forgiveness, you must include the following documentation:

  • The number of full-time employees and pay rates your company paid during the eight-week period
  • Payroll tax filings with the IRS
  • State income, payroll, and unemployment insurance filings
  • Proof of payments for mortgage, rent and/or utility payments
  • Certification that all the information you are supplying is true and correct ensuring that your loan was used for forgivable purposes
  • Check with your lending bank to make sure you meet any additional requirements by them too

What steps do I need to take right now to have my loan forgiven?

Step 1: Create a budget ahead of time. Know how much you are going to allocate for each section to ensure you don’t spend more than the 25% of non-payroll expenses for forgiveness.

Step 2: Keep track of everything you spend your PPP funds on.

Step 3: Know what you need to provide at the end of the eight-week period and how soon and how each of the documents needs to be submitted. Check with your lender for any additional information they may require.

Step 4: Keep any documentation of items you spend your PPP funds on.

All lenders have 60 days from the date that you apply for forgiveness to decide whether or not you qualify. If any portion of your loan is not forgiven, those amounts must be repaid within two years. As a bonus, any forgiven loans will be excluded from gross income for tax purposes.

HR Ledger can help.

Through our payroll system, we can schedule, automatically archive and keep your payroll records for you.

This is already included in your payroll agreement with HR Ledger and is no additional cost. Please call Malcolm or Scott today at 800-451-1136.

Written by:

Scott Evers

Scott Evers

Vice President Sales and Marketing