So first, your personal payroll amount for the forgiveness calculation is 8/52nd of the $31,530. Or roughly $4,800.

Second, I think your 56 day “window” starts on May 5 and includes all of the May 11 payroll. Even though some of that payroll is for days that fall before May 5.

Third, the way I count your 8 weeks, the ending date is June 30. That’s 56 days after May 5 (26 days in May obviously… another 30 days in June.) And that means that the next payroll on July 10 (which pays for June 16 though Jun 30) counts too.

Fourth, no, the forgiveness rules aren’t as harsh as you worry… The rule is you get forgiveness for payroll, rent, utilities and interest but that payroll can’t be more than 60% of the amount forgiven. (That 60% is the new number from the PPP flexibility Act.) To use your numbers if you get a $100K loan and spend $60K on payroll and $40K in rent, utilities and interest, you get full forgiveness. However, if you spend $48K on payroll and $40K on rent, you only get $80K of forgiveness… Why? Because at $80K, that $48K of payroll meets the 60% threshold.

P.S. The new PPP flexibility act lets you look at a 24 week window rather than an 8 week window. You will have option to look at 8 weeks. But you can also look at 24 weeks.

Thank you so much for all your articles. You are truly a Godsend and wealth of information. We spoke on the phone earlier today and here are my questions you asked me to submit.

I am the owner of an S Corp with 30 employees. My 2019 payroll salary in boxes 1,3,5 is $31,530. We are a small employer and don’t pay any benefits as of 2019 and 2020.

Here’s where its tricky for me. The first half on 2019 I took a salary of $1500 and from September of 2019 through December; 6000 a month in salary. That has continued from January to present.

I received my PPP on May 5th and paid my first payroll on check-date of May 11th (paydays are 10th and 25th but 10th fell on a Sunday and the 25th fell on a holiday so paid May 26th).

Here are my questions:
1. How do I calculate my max pay for forgiveness? Is it 8/52 of the $31,530 or 15% of the $31,530 or is that all wrong? I just decided to take a $4000 salary on May 11th and I went back and had Paychex void my salary for May 26th. I also removed myself from the upcoming June 10 & 25th payroll. Is that the best way to avoid all this hassle? Or can I still take a salary?

2. If I understand everything you have written thus far, even though the funds were deposited on May 5th, I can start the 56 day clock on May 11th when the first actually check-date took place? I calculate that being July 5th.

3. If that date is correct then the payroll for July 10th (which will be paying the June 16-30 period would be covered under the forgiveness period?

4. Last question is am I understanding the forgiveness correctly in that if ALL the guidelines aren’t met; then the whole loan isn’t forgivable? Or would it be on the portions that were not followed on the guidelines wouldn’t be forgivable? Example is you get $100,000 and spend $75,000 on payroll and $25,000 on rent-its forgiven;

Example 2-$100,000 and spend $80,000 on payroll, $15,000 on rent and $5,000 on other business expenses- whole $100,000 is NOT forgiven

Is this correct understanding?

Many thanks!

The PPP loan formula looks at 2019’s income. So a loss in 2020 shouldn’t matter. That loss in 2020, in fact, is sort of the point of you getting a loan.

I have paid two monthly draws equating to the revised 60% requirement, one in May right after I received the funds, and one 30 days later. But I realize that for loan eligibility for Schedule C filers, they went by a formula using Net Earnings from previous tax return.. I received my PPP on this basis

But, my business nose dived to $0 in March and little more in April. I am therefore sustaining a loss YTD ever since. Even if lender/SBA would accept my isolating just the 8-10 week original period or the extended 24 week period, this would not help as the last 8 weeks have continued to be very low even though my business is open again.

So am I and all other business who have to close or whose sales came to a grinding halt because of the pandemic just out f lock on forgiveness since net earnings are not even going to be close to last year’s tax return (not even 5% of this due to the closure). I have no idea how long it will take to rebuild from scratch which is where I am at. I know I am not alone.

Does the bill or revised bull consider this? That I took the draws equaling 60%, does that even help? Has anyone from SBA even considered this in their guidance or in Congress?

It does not se equitable to me that my business received this loan to help me keep it going but then I am penalized and have no control whatsoever other than taking draws to meet the forgiveness requirement.

Second question, can you still pay 75% of amount received in payroll or will that now be limited to 60%? If so, will the 15% difference still count if if is payroll?

Thank you for your input that I anxiously await!

I think the challenge for a sole proprietor who wants to count non-payroll costs is in order to count rent you need to have the rental agreement in force by February 15, 2020. Same rule for a mortgage or loan–in force by February 15, 2020. The same rule shows up in the statute for utilities but the SBA rules say for utilities you need to have the service in place… so maybe utilities (phone, gas for your car, internet) work.

Sorry.

I am confused by this new legislation that got passed by Congress and will go to the president to sign .

Under the proposal, small businesses would have to spend 60% of the loan money on payroll instead of the previous 75%. They could use the funds for six months, a change from two months.

So does that mean you can pay your self and employees for 6 months worth of salary?

sorry for the duplicate post Steve. I was apparantly having problems with my browser last night…..

As to question #1, I think I understand that since I paid myself 60,500 in 2019, as the owner of the S-corp, the most i can pay myself during the covered period is 8/52 of that or $9307..69

But, the bigger question I have is, can I pay an employee that made say, $30,000 in 2019, the maximum $15385? Or is that against the rules? My idea is to pay out as much of the loan as I can. I’ve searched everywhere and cannot find an answer to this….

Thanks again,

Tom

So my one-time gross paycheck that is thru May 31 (5/12 of year) should be $6250?

15,000 * (5/12) = $6250. (Even though the 15,000 includes the SEP-IRA amount of $3k, the employer doesn’t need to make that contribution now though right; instead the employer can make the one-time $3k contribution later at the end of the year?

Or should I just have the gross paycheck exactly be $2307.xx which is the forgivable amount?

I’m confused, thought I had this straight.

As the owner of an S-Corp with 10 employees, myself being one of them, the S-Corp paid me salary/wages of $60,000 in 2019.

Did you say that the most I can pay myself in the Covered period is 8/52 of the $60,000 which would be $9230.77. I was planning on paying myself the $15385.

Can I?