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How to Get PPP Forgiveness

Guidelines were given last week, and regulations were just released near the midnight hour Friday May 22nd. There seem to be a bazillion exceptions and special rules, and the forgiveness application document itself is quite a menagerie.

And, unfortunately, there are a significant amount of unknown or unclear items.

Based on what we currently know, the basic answer to gain forgiveness is:

Use the PPP loan for its designated purpose over the 8 week period following the day of funding, with a minimum 75% of it used on payroll costs, and with an equal amount of full-time equivalent employees as you had in 2019, and the other 25% on certain designated expense types.

Sounds simple!?

Not so fast. To get the most forgiveness possible, it will very likely take some planning, and in most cases some judgment calls.

To assist you in that, here’s more specifics about the basics, and other items that might affect you:


  • Per the IRS, pay 75% of the loan on payroll costs (gross wages/salaries, state unemployment insurance/tax, company retirement matching, health insurance or stipends) **

  • Pay 25% on rent (or mortgage interest), and garbage, electric, natural gas, water, internet access, telephone

  • Pay the above within 8 weeks of funding (Ex: if you were funded Wednesday May 13, the 8 weeks ends Tuesday July 7). However, Congress is discussing a possible alteration to this time period.

  • Your average full-time equivalent [FTE] employees over the 8 weeks is the same as your 2019 average – or on June 30, 2020 you have the same FTE as 2019. [What is FTE? Ex: if you had 4 employees during 2019 and they worked a total of 6,550 hours, then your full time equivalents for 2019 were 3.15 (6,550 divided by 2080 hours in an employee year)

  • The forgivable portion will be allocated based on the above

Items that may affect you:

Payroll costs:

  • **the 75% requirement is NOT legislated; it is an IRS interpretation. It is possible this requirement could be altered by Congress within the next few weeks – but that is unknown.

  • if an employee is fired for cause, voluntarily resigned, or requested a reduction in hours – then that employee does NOT count toward the FTE requirement. (for re-employment, the offer must be in writing, and you must report the individual as ineligible for unemployment)

  • S corporation shareholder salaries at 2019 rates count: Yes

  • Prior year or prior period employer provided pension costs: Unknown

  • Contract labor: No

  • Bonuses/raises: Yes, if in the regular course of business, but not for owners

  • Late health insurance premiums: unknown (yet late rent payments qualify so this might get approved)

Non-payroll costs:

  • Automobile expenses: Gas apparently yes, but repair, insurance, etc. are not identified, and so this is limited to gasoline at this time. This could be expanded or the gasoline itself may be taken out.

  • Back rent and utilities: Yes

  • Back-dated agreements or contracts: No


  • Your biggest stickler could be matching current FTE employees with the prior year FTE. You need to make sure that is up to speed.

  • Alter payroll dates to assure payroll is paid on the 56th day

  • Plan ahead to make sure rent and utility payments clear your bank by the 56th day, or have proof of remittance

  • At this time, there will not be a tax deduction for the expenses paid with forgiven PPP funds, unless future legislation changes that.

  • Summarize where you are every 2 weeks or so with regard to the 75%/25% ratio, the full use of the funds, and (very importantly) the status of your full time equivalent employee roster.

  • You have 60 days after the 8 week period to submit your loan forgiveness application and related documentation.

  • You have zero time to act after the 56 days has expired.

Up For Grabs (i.e. unclear provisions or yet to be determined):

  • Will the SBA require the EIDL advance to be deducted from the forgiven portion of the PPP loan?

  • The SBA says “if applicable” with no specifics given. Some online models reduce the forgivable loan amount by that SBA advance.

  • Will the 8 week time period be altered to give re-opening businesses a benefit?

  • Will the 75% rule imposed by the IRS stick, or be overridden by legislation?

  • Will there be leniency on such unknowns as paying 2019 employer matching contributions, paying more than 2 monthly health insurance premiums, allocating state unemployment costs, and other such possible expenditures?

[Hint: my recommendation is to first pay those types of expenses that are known to apply toward loan forgiveness, then pay the above-mentioned expenses for which it is unknown (at this time) if they will apply.]

If you have questions or concerns, or wish to have your forgivable loan status reviewed or calculated, or your forgiveness application filled out, we stand ready to assist.

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