The government finally released forgiveness guidance under the Paycheck Protection Program (PPP). This new guidance provides important updates that will help borrowers maximize their PPP loan forgiveness amount. All borrowers should pay close attention to this new guidance and start planning for the PPP’s forgiveness stage.
We recently discussed guidance and preparation for the forgiveness stage.
Commonly Asked Questions
What should we be aware of in the new guidance for the forgiveness stage?
SBA guidance gave further clarification on payroll costs, eligible non payroll costs, salary reductions and documentation.
New PPP Loan Forgiveness Guidance Issued
If any (federal, state, local, corporate, foundation, etc.) grantor reimburses an organization for payroll costs, those costs are not eligible for forgiveness using the PPP loan? Is that correct?
PPP should not be applied to costs that are paid for with other sources. Thus, the reimbursed costs from other sources should not also be included in the forgiveness calculation (the loan proceeds should not be used towards those costs in the first place). Our recommendation is to consider grant budget amendments from payroll costs to other non-eligible PPP costs during the “covered” 8-week period to allow the payroll costs to become PPP eligible costs.
If you are filling a FTE with contract labor (outside agency) is this allowable cost under the PPP?
Eligible costs under PPP include payroll costs, most mortgage interest, rent, and utility. Payroll costs include salaries, wages, commissions, tips, employee benefits, and state/local payroll taxes. Contract labor would not be allowable.
So, any grant or other contract which reimburses us for direct payroll costs is not claimable under PPP?
Correct. Costs should not be charged to PPP if they are claimed under other funding sources. Our recommendation is to consider grant budget amendments from payroll costs to other non-eligible PPP costs during the “covered” 8-week period to allow the payroll costs to become PPP eligible costs.
Do hours for all salaried employees working remotely, covered by PPP funds, have to be tracked?
Due to recent guidance announced since the airing of the webcast, PPP is not subject to Uniform Guidance. Therefore, the time and effort requirements under Uniform Guidance do not apply. However, best practice would be to follow your organization’s time and effort reporting policies and implement tracking of payroll costs to ensure you do not double dip with other funding sources, unless no other cost-based funding is received.
When recording our expenses under the PPP loan would you advise us to keep track of both the "accrual basis" and "cash basis" for all expenses since date of loan disbursement for requesting the loan forgiveness?
At this time, we believe the payroll cost should include those that are earned by the employee during the 8-week covered period. Additionally, other payroll costs such as health insurance, retirement and state/local taxes, should be those incurred and not necessarily paid during the same 8-week covered period. Our recommendation would be to track your expenses based on your organization’s basis of accounting (i.e. most likely accrual).
Learn more about how to maximize your loan forgiveness now.
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