Updated Frequently Asked Questions on PPP Loan Forgiveness
On August 4th, the SBA released further guidance on PPP program questions after consultation with the Department of Treasury. The guidance was provided to supplement the PPP Interim Final Rules. The guidance is the PPP Frequently Asked Questions (FAQs) on Loan Forgiveness at the SBA website at: https://www.sba.gov/document/support-frequently-asked-questions-ppp-loan-forgiveness
The following are some items to note for owners referenced in this guidance:
Maximum Amount of Cash Compensation for Owner-Employees:
The maximum amount of compensation that can be counted towards forgiveness for an individual with any ownership interest in an S corporation, C corporation, partnership or sole proprietorship (Schedule C business) cannot exceed the lesser of $20,833 or 20.833% of their 2019 compensation, and this cap applies cumulatively to all companies that the owner/employee is paid by. The allocation of this will be as selected by the borrower companies. The $20,833 /20.833% presumes a “Covered Period” of 10.6 weeks or more. A borrower that elects to use an 8-week Covered Period will be limited to the lesser of $15,385 or 15.385%.
Health Insurance for Owner-Employees:
Owner-Employee C-Corporation: Employer health insurance contributions and retirement contributions are eligible expenses.
Owner-Employee S-Corporation: The new rules clarify that health insurance costs will not be added to compensation for S corporation employees that own at least 2% in the business, and that health insurance costs paid for family members of such 2% or more owner/employees will not be counted.
Retirement for Owner-Employees:
Owner-Employee C-Corporation: Retirement costs are capped at 20.833% of 2019 employer retirement contribution.
Owner-Employee S-Corporation: Employer retirement contributions made on behalf of an owner-employee of an S corporation are included and do not count toward the cash compensation cap per individual.
Self-Employed Individuals and General Partners
Employer health insurance contributions and employer retirement contributions made on behalf of self-employed individuals or general partners are not included as eligible expenses.
Is Your CPA Looking Out for You?
Smith, Sullivan & Brown, P.C.
80 Flanders Road, Suite 200
Westborough, MA 01581
Member of American Institute of Certified Public Accountants
Massachusetts Society of Certified Public Accountants
Corridor 9/495 Regional Chamber of Commerce
Metrowest Chamber of Commerce
Stay on top of the latest tax laws, requirements and updates.