The PPP Loan Forgiveness Application - What Will You Need To Fill It Out?


My first client completed his eight week covered period of his Payroll Protection Program (PPP) loan and I have worked through the forgiveness application. I read the instructions but to grasp the application and explain it I had to jump in and fill it out. I learned a lot along the way that I can share with you. The calculations are what they are but the needed information was something of a surprise as were the QuickBooks reports and their formats. I was able to download reports from QB in excel format and edit them to get the useful information in a format to do the calculations.

I will address what payroll information you need to complete the application but at the same time the application itself is a bit of a puzzle. The other expenses you will need to complete the application should be simple enough to get but the payroll data will be a test.

What payroll information do you need?


For the Covered Period you will need the following by employee:
Gross Pay
Hours
Weeks

In addition for the Average FTE and Salary/Hourly Wage Reduction calculations you will need the following by employee but for different time periods:
Gross Pay
Hours
Weeks
Time Periods for FTE
Time Period Election: Either 2/15/19 - 6/30-19 or 1/1/20 - 2/29/20
Assume you will need both.
2/15/20 - 4/26/20
as of 6/30/20
for the pay period that included 2/15/20

Time Periods for Salary/Hourly Wage Reduction
1/1/20 - 3/31/20
As of 2/15/20
between 2/15/20 - 4/26/20
as of 6/30/20

It is the same basic information by employee for several different time periods. The information is used to calculate average hours worked per week, gross pay per week, and the full time equivalency. The report I ran in QB gave me weekly payroll information that I had to sort by employee and get rid of information that was not needed. It took a while to do.  Hopefully if you have a payroll provider they can provide this information in a usable form. An excel spreadsheet is handy because the information can be manipulated to the needed format for making the calculations.

That Does Mean What You Think It Means

You would think the Salary/Hourly Wage Reduction would be a reduction simply for reducing hourly pay but no. But as I wrote about in a previous post, it is the difference between the hourly pay in the covered period and the base period by employee. If an employee's hourly wage during the covered period is less than 75% of what it was during the base period then the reduction is calculated by taking the difference between the hourly rate during the covered period and 75% of the hourly rate from the base period times the average number of hours worked per week during THE BASE PERIOD and multiply that by 8. So if you paid someone less per hour than you did during the base period by more than 25% and you paid them for fewer hours in the covered period then the reduction rate reflects both the wage differential and the difference in hours times 8. But that is if you elect the 8 week coverage period. If you elect the 24 week covered period then it is times 24.

Covered Period

By the way, from the application, it looks like the choice for the coverage period is either 8 weeks or 24 weeks. However, another of my clients shared with me that his bank said he could apply after 13 weeks. So that seems to be an important question that needs to be clarified. But it is also worth noting there may be variations in the interpretation of the Forgiveness Application between banks.

The Application Is Sort of A Puzzle

It was weird going through the application because it seems to tell you to go here and then go there and if something else go somewhere else. I got through it but it was like working a puzzle and I learned the hard way that I did not have all the needed information to complete the application and so I had to run more reports and get the data in the appropriate format. To save you that experience I have provided this outline above of the information you will need. When you get in to the application you will also see why I broke out the time periods need for the FTE and Salary/Hourly Wage Reduction separately. With the basic data by employee for the various time periods you will then need to figure out the different calculations.

Help

You will probably need someone who can generate the necessary payroll reports and calculate the numbers you need for the application. So consider who can run the reports and who is good at solving puzzles and has the patience to do so. If you would like my help contact me use my information below to email me to arrange an appointment for a consultation via a phone, Zoom, or Skype call.


jeff.jhtaxes@gmail.com
217-923-8007



Be careful when reading about tax law and its application, including my articles, because the wording and definitions are such a challenge and are influenced by writers perspective, specifically his own clients situations that he is mindful of and other situations the writer is not thinking of. The point is talk to your CPA about your situation and circumstances and don't rely on or make conclusions based on articles you read, including articles form irs.gov, because concepts and definitions are not very clear, and of course, they are subject to change. Now is the time to be having discussions about your situation and developing strategies for you and your business. Again, contact me using my information above to discuss your situation. I help business owners all over the U.S. and in foreign countries with their tax returns.