2nd draw PPP loan forgiveness

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#1
Andrew  
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My client had a salary of $31,000 in the covered period. It looks like the cap for forgiveness is about $20,000 per owner/employee. Can I reduce the amount spent on payroll on the forgiveness application to about 60% of the loan amount? Client spent well over 40% of loan amount on rent and utilities.
 

#2
sjrcpa  
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Sure.
 

#3
Andrew  
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Thanks. This is for an owner-employee and just read that the cap is at 20,000 payroll for an owner employee. Do you fill out the capped amount or the amount actually spent on payroll?
 

#4
sjrcpa  
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On the application put only the allowable payroll amount.
Unless you're using the long form where you put it all and there is a computation to show the limited amount.
 

#5
Andrew  
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Okay, less than 60% is spent on wages because of the cap. Do we ask for forgiveness of the full loan? And SBA figures out the amount, about 4K, that can't be forgiven?

S corp Client has health insurance (which is part of payroll) and second owner-employee is covered under the same policy. Can this qualify as wages for him even though her name is listed as primary on the policy which covers him as well? It wasn't listed as payroll on the 941, so I guess we're out of luck here. Just thinking out loud and trying to avoid partial forgiveness.

Thanks for all your help.
 

#6
sjrcpa  
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Have you looked at the forgiveness application form and instructions?
Based on your facts it will end up showing not all is forgivable.
 

#7
dsocpa  
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I can only speak of my experience assisting a client with his forgiveness application. Bank was PNC, client sole shareholder of an S corp. Health insurance was paid through the S but not in the name of the S. The bank, going by the 940 which didn’t have the HI added (forget which box) denied forgiveness filed without HI included thus insisted on using the 940. The bank would not accept the corrected W2 filed with HI included even though filed months prior to forgiveness application. Nor would the bank acquiesce on looking at the additional expenses comprising the 40%. They strictly focused on payroll (i.e., incorrect 940). I pressed the issue. This business took a loan for under $25k when the pandemic first hit and there was little information about what could be included in S corp owner salaries, except that salary had to be capped at $100k over 8 weeks. The wording regarding health insurance and company contributions to retirement plans was vague and most of us computed the PPP loans based on the HI and matching (this was a SIMPLE plan). Then the law was changed to 24 weeks. I took numerous webinars regarding PPP calculation and forgiveness, read the SBA IFR’s and still was unsure. Anyway, with the $100k cap ($20,833) + HI and matching the total came to ~ $1k over the PPP loan balance. The bank eventually accepted that figure as amount spent on payroll but not until every bank statement for 2020 and all HI invoices for paid in 2020 were provided. In addition the amounts deducted from the business account had to match the bank statement. Same with matching contributions made in 2020 for 2020. For the matching, the confirmation PDF (which thankfully I had downloaded each time) which had to reconcile to the bank statements - 2020 only. This all happened with some very tense discussions with the bank. Fortunately, being unsure regarding the HI and Match and salary when computing the PPP-2 loan amount the match and HI were not included even though now I know, PNC at least will allow those to be added to the cap, of 20,833. Forgiveness for PPP2 was approved without any questions from the bank or documents provided - not even the payroll register.
 

#8
juro  
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is there a deadline?
 

#9
sjrcpa  
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The end of the loan term. But if you wait that long, you'll be making monthly payments.
 

#10
juro  
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no, i meant, is there a deadline to apply for forgiveness?
 

#11
sjrcpa  
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The deadline to apply for forgiveness is:
by the end of the loan term
 

#12
juro  
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source:SBA

How and when to apply for loan forgiveness

A borrower can apply for forgiveness once all loan proceeds for which the borrower is requesting
forgiveness have been used. Borrowers can apply for forgiveness any time up to the maturity date
of the loan. If borrowers do not apply for forgiveness within 10 months after the last day of the
covered period, then PPP loan payments are no longer deferred, and borrowers will begin making
loan payments to their PPP lender.
 

#13
sjrcpa  
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That's what I said, twice, isn't it?
 

#14
Andrew  
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dsocpa wrote: Then the law was changed to 24 weeks. I took numerous webinars regarding PPP calculation and forgiveness, read the SBA IFR’s and still was unsure. Anyway, with the $100k cap ($20,833) + HI and matching the total came to ~ $1k over the PPP loan balance. The bank eventually accepted that figure as amount spent on payroll but not until every bank statement for 2020 and all HI invoices for paid in 2020 were provided. In addition the amounts deducted from the business account had to match the bank statement. Same with matching contributions made in 2020 for 2020. Fortunately, being unsure regarding the HI and Match and salary when computing the PPP-2 loan amount the match and HI were not included even though now I know, PNC at least will allow those to be added to the cap, of 20,833. Forgiveness for PPP2 was approved without any questions from the bank or documents provided - not even the payroll register.


Thanks for your post. My client is also an S Corp with 1 owner employee. Her wages, excluding her health insurance, were over $20,833 (the capped amount based on 100K salary/year) in the 24 weeks covered period. Do I add the S Corp owner's health insurance paid to the $20,833 wages and ask for forgiveness for $20,833 + $4,000 paid in health insurance = $24,833? The $24,833 would then be the total amount spent on payroll cost.
 


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