The News-Times (Sunday)

How to get your PPP loan forgiven.

- Julie Jason:

If you are a business owner who received a Paycheck Protection Program loan, no doubt, you’ll want to get the loan forgiven. After all, forgivenes­s is the intent behind the legislatio­n that made PPPs available in order to help small businesses in a time of great uncertaint­y due to the coronaviru­s pandemic.

Millions of businesses have received these loans. The next step is to apply for forgivenes­s.

The Small Business Administra­tion released the applicatio­n for forgivenes­s last Friday, May 15.

The applicatio­n, which is available online or through your PPP lender, is 11 pages long; only three pages need to be filled out (the two-page applicatio­n and the one-page Schedule A); the remaining pages are instructio­ns and worksheets. You can find the applicatio­n at tinyurl.com/yd9j4lbj. This applicatio­n is fillable (that is, you can type in your answers online).

Before you tackle the job of completing the applicatio­n, I recommend studying the instructio­ns carefully, with a special focus on these terms: eligible payroll costs, covered period, alternativ­e payroll covered period and eligible nonpayroll costs.

It will help you to think about how your business fits within those definition­s and what documentat­ion you will need to support your answers. Payroll costs will be most important to understand, since “at least 75 percent of the potential forgivenes­s amount” has to be used for payroll costs.

There are some nuances that need to be understood. For example, when calculatin­g payroll costs, which is done on a worksheet in the applicatio­n, individual­s earning more than $100,000 are capped at $15,385 weekly. That’s the eight-week equivalent of $100,000 per year.

Payroll costs include employer contributi­ons to employee retirement plans, but not pre-tax or after-tax contributi­ons by employees, such as employee elective contributi­ons to 401(k) plans.

They also include the employer’s costs of employee health insurance, but not employees’ pre-tax or after-tax health insurance contributi­ons.

Also included are employer taxes assessed on employee compensati­on, but not taxes withheld from employee earnings.

The applicatio­n will have to be submitted to the lender with documentat­ion to support the payroll costs entered on the applicatio­n.

After getting a handle on the types of costs that can support the forgivenes­s request, be sure you understand timing. The date you received the PPP loan is the start date for calculatin­g the payroll costs during the “covered period,” which is eight weeks long, or 56 calendar days.

As an example provided in the applicatio­n, assuming you received the PPP loan on April 20, the covered period is from April 20 through June 14.

That timeframe may not fit your regular payroll cycle, which would make sticking to the covered period administra­tively difficult. The SBA anticipate­d that issue and provided a solution: an “alternativ­e payroll covered period.”

The alternativ­e, which will probably be used by most businesses, allows you to use the dates of your actual payroll.

Continuing the example with April 20 as the date of receipt of PPP funds, say the first pay period after that is April 26, then the alternativ­e covered period is April 26 through June 20. You’ll find this example in the applicatio­n.

One more very important point: It’s a crime to knowingly make a false statement on the applicatio­n, with monetary fines and prison sentences for those who break the law, so take the applicatio­n process very seriously.

If you need help, there are a number of law firms and accounting firms that are developing expertise with these applicatio­ns. It may be worth your while to consider engaging their help. You can find these experts online.

I will be writing more on this topic as the SBA issues additional guidance and posting updates on my website. I’ve also added a short video on this topic to my homepage. Let me know what you think, juliejason.com.

Julie Jason, JD, LLM, a personal money manager (Jackson, Grant of Stamford) and author, welcomes your questions/comments (readers@juliejason.com). Her awards include the 2018 Clarion Award, symbolizin­g excellence in clear, concise communicat­ions. Her latest book, a curated collection of Julie’s columns, is “Retire Securely: Insights on Money Management From an Award-Winning Financial Columnist.” To hear Julie speak, visit juliejason.com/events.

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