As funds are depleting, business owners are shifting their focus to PPP forgiveness applications. Although many banks are still working on their processes to accept the forms, there are steps to take today to ensure everything is ready when the time comes.
1. Gather Information. Part of the application will request identification information about the loan. This is located on the initial loan documents and should be gathered prior to starting the application process. Below are the items that should be noted:
a. SBA PPP loan number
b. Lender (Bank) PPP loan number
c. PPP Amount and disbursement date
d. EIDL advance amount and application number
2. Number of Employees/Compensation. There are limits on the forgivable amount if the number of employees and/or their total compensation was reduced after PPP funds were received. However, there are safe harbors and exemptions, so it is important to know the exact dates when changes occurred to determine eligibility.
3. Payroll Reports. A large portion (if not all) of the forgivable costs will be payroll related. To verify the amounts, payroll summaries will be needed to support the compensation paid during the covered period. For many businesses, the covered period starts with the disbursement date and lasts for 24 weeks. Most payroll companies will allow for reports to cover custom timeframes. If not, individual reports for each pay period may be needed.
4. Other eligible costs. Although payroll will cover most costs with the period extended to 24 weeks, there are other expenses to use the funds for. If applicable, businesses must be able to provide support for the amounts paid and the dates these costs were incurred.
a. Employee health premiums, retirement benefits, and state employer taxes must be incurred and paid during the covered period
b. Mortgage interest, rent, and utilities in connection with the business must be incurred and paid during the covered period AND proof must be presented the obligation was in place prior to February 15, 2020.
In addition to providing 24-weeks to use PPP funds, the first payment for any non-forgiven amount was also extended to 10 months after the covered period. This new window will allow for plenty of time to get all information in order and submitted to the banks.
If you want more information on PPP forgiveness or need help with application preparation, contact our professionals at The Innovative CPA Group at 203-489-0612. Or contact us online.
Written by CPA, Justin Anderson