I got PPP and I want it to be forgiven. What’s next?
The first thing you should know about PPP Loan, is that if you want it to be forgiven, You must ask for it!. Otherwise, you will end up paying this money back to the government partially or in full! We have gathered some tasks you need to consider to be prepared for your forgiveness application.
1. Keep track of your spending during your eight-week loan term.
At least 75% of the loan must be used for payroll and the remaining 25% for other business obligations like rent, utilities, mortgage and certain debts (Mortgages and Rent agreements must have been signed prior to February 15, 2020.) to qualify for forgiveness, anything outside the loop will be considered payable.
We have created a Expense tracking Template, feel free to make a copy to yourself and use it to keep track of all expenses incurred during the 8 weeks.
2. Know the right expenses for payroll and prepare your payroll report for your application.
As we have mentioned before there are certain payroll expenses included, some others will not be part of the forgivable portion, just in case you miss our previous email we will break it down for you.
Salary, wages, commissions, or tips—capped at an annual sum of $100,000 (prorated to the eight-week period) for each employee
For tipped employees, you can pay wages to cover what they would normally have earned in tips and have them forgiven.
Paid time off and leave, including costs for paid vacation and parental, family, medical, or sick leave (If you’re using credits from the FFCRA for any of the above, those amounts are not eligible for forgiveness.
Employee benefits, including group health insurance premiums and payment of any retirement benefit. In this category we have; Health, dental and vision insurance plan, Health FSAs and HRAs with the exclusion of QSEHRA.
HSAs, commuter benefits, Group term life plan (as long as there are no ancillary benefits for medical care)
Long term and short-term disability plan
State and local Taxes (ou may not be able to get forgiveness for the employer’s share of FICA, RRTA, or federal income taxes reported on Form 941)
Knowing what is included and what not, run a payroll report for the 8 weeks and use your federal and state payroll tax filings for your calculations.
Ask your accountant / payroll preparer for help.
3. Keep documentation for the other 25% - Other expenses.
Maintain records for all the qualifying expenses like rent, utilities and interest on mortgages.
We recommend going paperless, making copies or taking good pictures and saving it in the cloud will ensure you don’t misplace them.
Supporting documents include checks, bills, receipts, contracts, bank statements.
4. Submit your forgiveness application to your lender by the deadline.
Keep in mind there are some overhead rules for how this should work, however, every lender could require additional documentation to prove your expenses qualify for forgiveness.
Contact your lender around week 6 and ask about what they are going to request in order to be ahead of the game. You will have enough time to collect and submit your application and supporting documents for forgiveness.
We hope this information is helpful to you, we found this article from GUSTO very informative as well, go take a look.
Partner with your accountant/bookkeeper and ask for assistance if you feel you need additional information or help.
If you found this information helpful please like and share.
Need help? Contact us at email@example.com or by phone (510) 992-3499