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Check back often as we will update these FAQs as more guidance is released. This page has been updated as of **April 15, 2020.**   SBA Paycheck Protection Program #### General Information --- - ![](https://www.webxpertos.com/hubfs/TALANTON/arrow-down.png) What are the general eligibility requirements? - - 500 or fewer employees whose principal place of residence is in the US - A small business concern as defined in section 3 of the Small Business Act and are subject to SBA's affiliation rules under 13 CFR 121.301(f) unless specifically waived in the Act, a section 501(c)(3) tax exempt organization, 501(c)(19) tax-exempt veterans organization, Tribal business concern, or an individual who operates a sole proprietorship, is an independent contractor or is an eligible self-employed individual - In operation on February 15, 2020 and had employees or paid independent contractors - There are other factors in determining eligibility. Review the [interim final rule issued on April 2](https://www.sba.gov/sites/default/files/2020-04/PPP--IFRN%20FINAL_0.pdf), the [interim final rule providing additional information issued on April 14](https://www.sba.gov/sites/default/files/2020-04/Interim-Final-Rule-Additional-Eligibility-Criteria-and-Requirements-for-Certain-Pledges-of-Loans.pdf) and [PPP FAQs](https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Frequently-Asked-Questions.pdf) for further guidance. - ![](https://www.webxpertos.com/hubfs/TALANTON/arrow-down.png) What guidance has been issued by the Small Business Association (SBA) and Treasury? - SBA issued an [interim final rule on April 2](https://www.sba.gov/sites/default/files/2020-04/PPP--IFRN%20FINAL_0.pdf), issued [additional information on April 14](https://www.sba.gov/sites/default/files/2020-04/Interim-Final-Rule-Additional-Eligibility-Criteria-and-Requirements-for-Certain-Pledges-of-Loans.pdf)  and has provided [PPP FAQs](https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Frequently-Asked-Questions.pdf) providing further guidance. - ![](https://www.webxpertos.com/hubfs/TALANTON/arrow-down.png) Are faith-based organizations eligible to receive SBA loans under the PPP and/or EIDL? - SBA issued [FAQs regarding participation of faith-based organizations](https://www.sba.gov/sites/default/files/2020-04/SBA%20Faith-Based%20FAQ%20Final.pdf). - ![](https://www.webxpertos.com/hubfs/TALANTON/arrow-down.png) What is the maximum amount that can be borrowed? - The lesser of: - Average monthly payroll costs as defined by the SBA times 2.5 - If there is an outstanding amount of an Economic Injury Disaster Loan (EIDL) made between January 31, 2020 and April 3, 2020 that can be added to the PPP loan amount request. - $10 million - ![](https://www.webxpertos.com/hubfs/TALANTON/arrow-down.png) What are the terms of the loan and the interest rate? - The interest rate will be 1%. The maturity of the loan is 2 years.  Payments are deferred for 6 months following the disbursement of the loan. Interest will accrue on the loan beginning with disbursement. - ![](https://www.webxpertos.com/hubfs/TALANTON/arrow-down.png) What documents are needed to be supplied with the application? - The Interim Final Rule stated that lenders must confirm the dollar amount of average monthly payroll costs by reviewing the payroll documentation submitted with the application. Lenders may differ in the payroll documentation that they require. However the AICPA has made [recommendations](https://www.aicpa.org/content/dam/aicpa/press/pressreleases/2020/aicpa-ppp-recommendations-letter.pdf) for the documents to be prepared and submitted with the application.   - ![](https://www.webxpertos.com/hubfs/TALANTON/arrow-down.png) For self-employed individuals, what if the 2019 Form 1040 has not been submitted to the IRS at the time of the application? - The guidance states that regardless of whether you have filed a 2019 tax return with the IRS, you must provide Form 1040 Schedule C with the loan application. - ![](https://www.webxpertos.com/hubfs/TALANTON/arrow-down.png) What about self-employed individuals who were not in operation in 2019, but were in operation on February 15, 2020 and will file a Form 1040 Schedule C for 2020? - SBA indicated that additional guidance will be issued related to this issue. - ![](https://www.webxpertos.com/hubfs/TALANTON/arrow-down.png) Considering the guidance that was issued on April 14 around partnerships and LLCs taxed as a partnership, can an amended loan application be made to include as additional payroll costs the self-employment income of general partners? - We are aware that some partnerships have submitted applications for PPP loans that did not include the self-employment income of general partners in the calculation of payroll costs. We are pursuing guidance from the SBA as to options for a remedy; however, in the absence of current guidance talking with your lender directly is suggested. ... SBA Paycheck Protection Program #### Calculation of payroll costs --- - ![](https://www.webxpertos.com/hubfs/TALANTON/arrow-down.png) How should payroll costs for businesses other than self-employed individuals be calculated for the purposes of the loan amount relative to payroll taxes? - Payroll costs are calculated on a gross basis without regard federal taxes imposed or withheld including FICA and Medicare. Payroll costs are not reduced by taxes imposed on an employee and are not increased by the employer's share of payroll taxes. - ![](https://www.webxpertos.com/hubfs/TALANTON/arrow-down.png) What other costs should be considered when determining payroll costs for businesses other than self-employed individuals? - Payroll costs consist of compensation to employees including salary, wages, commissions or similar compensation; cash tips or the equivalent; payment for leave; allowance for separation or dismissal; payment for employee benefits including group health care coverage and insurance premiums; retirement contributions, payment of state and local taxes assessed on the compensation of employees. - ![](https://www.webxpertos.com/hubfs/TALANTON/arrow-down.png) Are there any other specific exclusions in determining payroll costs? - - The compensation of an employee whose principal place of residence is outside of the U.S. - The compensation of an individual employee in excess of an annual salary of $100,000 - If the borrower took credits under the Families First Coronavirus Response Act (FFCRA) for sick and family leave wages, those costs are also excluded. - ![](https://www.webxpertos.com/hubfs/TALANTON/arrow-down.png) The CARES Act excludes payroll costs for compensation greater than $100,000. Does that exclusion apply to employee benefits? - The $100,000 cap applies only to cash compensation not to non-cash compensation such as retirement plans or group health care. - ![](https://www.webxpertos.com/hubfs/TALANTON/arrow-down.png) What period of time should be used to calculate payroll costs for businesses other than self-employed individuals? - - Borrowers can calculate payroll costs using data either from the previous 12 months or from the 2019 calendar year. - For seasonal businesses, the applicant may use average monthly payroll for the period between February 15 or March 1, 2019 and June 30, 2019. - A business that was not in operation for that period may use the average monthly payroll costs for the period January 1, 2020 to February 29, 2020. - ![](https://www.webxpertos.com/hubfs/TALANTON/arrow-down.png) Are payments to independent contractors included in payroll costs? - Payroll costs do not include payments to independent contractors. Independent contractors have the opportunity to apply for PPP funding. - ![](https://www.webxpertos.com/hubfs/TALANTON/arrow-down.png) Are part-time employees and/or temporary seasonal employees included in payroll costs? - All employees paid during the period of time selected are included in payroll costs. - ![](https://www.webxpertos.com/hubfs/TALANTON/arrow-down.png) What if a business contracts with a payroll provider or a Professional Employer Organization (PEO) to process payroll? Are those costs included as payroll costs of the eligible borrower? - In [FAQs released by the SBA](https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Frequently-Asked-Questions.pdf), they recognize that the payroll for employees in this arrangement will not be reported on Form 941s for the borrower. The employees’ gross salary and benefits would be included as part of payroll costs when calculating the loan amount. For documentation, the SBA suggests providing Schedule R from Form 941 (an allocation schedule for aggregate Form 941 filers) or a statement from the payroll provider or PEO. - ![](https://www.webxpertos.com/hubfs/TALANTON/arrow-down.png) For churches/religious organizations, should a minister’s housing allowance be included as part of payroll costs? - Per the interim final rule, payroll costs consist of compensation to employees including salary, wages, commissions or similar compensation. The lender will make the determination whether the housing allowance is considered similar compensation absent further guidance. ... SBA Paycheck Protection Program #### Pass-through entities calculation of payroll costs --- - ![](https://www.webxpertos.com/hubfs/TALANTON/arrow-down.png) How do S Corporations determine payroll costs? - Businesses should accumulate payroll costs based on the general guidelines as noted above. Specifically, owners who receive reportable wages (i.e. W-2 wages) should be included as payroll costs up to the $100,000 limit.  Benefits paid to the owner(s) and other employees should be included in payroll costs. Specific guidance is not available related to shareholder distributions, but since these distributions are not considered wages to the shareholder, it is presumed that shareholder distributions are not to be included in payroll costs. - ![](https://www.webxpertos.com/hubfs/TALANTON/arrow-down.png) How do partnerships and LLCs determine payroll costs? - Businesses should accumulate and report payroll costs based on the general guidelines as noted above. Additionally, guidance issued on April 14 states that payroll costs should also include the self-employment income of general active partners (subject to $100,000 compensation cap). Although partners/members are not treated as employees of the partnership/LLC and do not receive “wages”, the SBA determined that partners/members are not permitted to obtain PPP funds based on their self-employment income from a partnership/LLC. - ![](https://www.webxpertos.com/hubfs/TALANTON/arrow-down.png) How do single member LLCs determine payroll costs and do they apply as a business, sole proprietor or self-employed person? - More guidance is needed in this area. The presumption is that if the LLC is considered a disregarded entity, then the application would be made as a self-employed person. If the LLC is electing to be taxed as a partnership, the guidance regarding partnerships/LLCs would apply in the calculation of payroll costs.  ... SBA Paycheck Protection Program #### Self-employed individuals and independent contractors --- - ![](https://www.webxpertos.com/hubfs/TALANTON/arrow-down.png) How are payroll costs calculated for self-employed individuals and independent contractors with no employees? - The loan amount will be determined based on 2019 Form 1040 Schedule C line 31 net profit amount, up to $100,000. If the Schedule C shows a net loss, the allowed loan amount is zero. - ![](https://www.webxpertos.com/hubfs/TALANTON/arrow-down.png) How are payroll costs calculated for self-employed individuals and independent contractors with employees? - The loan amount will be determined by the sum of the following: - 2019 Form 1040 Schedule C line 31 net profit amount, limited to $100,000. If the Schedule C shows a net loss, then this amount is 0 - Payroll costs as calculated above   - ![](https://www.webxpertos.com/hubfs/TALANTON/arrow-down.png) Are health insurance premium payments and retirement contributions added to payroll costs for self-employed individuals? - Based on guidance provided, health insurance premiums and retirement contributions will be added to payroll costs for individuals with employees. For self-employed individuals with no employees, the loan amount is determined based on net profit from Form 1040 Schedule C. - ![](https://www.webxpertos.com/hubfs/TALANTON/arrow-down.png) Do individuals who are self-employed and report income/expenses on forms other than Schedule C (such as Schedule F (farming) or Schedule E (rent/royalties) qualify to apply for the PPP? - More guidance is needed in this area. Based on the current guidance provided, Form 1040 Schedule C is required to be used to calculate the loan amount. ... SBA Paycheck Protection Program #### Determining number of employees for less than 500 employee limit/affiliate questions --- - ![](https://www.webxpertos.com/hubfs/TALANTON/arrow-down.png) What time period should be used to determine the number of employees for the loan application? - Businesses may use average employment over the previous 12 months or for the calendar year 2019 for the purposes of applying an employee- based size standard. As an alternative, this formula provided by the SBA can be used: average number of employees per pay period in the 12 completed calendar months prior to the loan application (or the average for the periods the business has been operational if less than 12 months). - ![](https://www.webxpertos.com/hubfs/TALANTON/arrow-down.png) Are part-time or seasonal employees included in the employee count? - Yes, all individuals who are considered employees (including those obtained from a temporary employment agency, PEO or leasing concern) are included in the employee count.  Per SBA FAQs, you can average employment over the required time period. - ![](https://www.webxpertos.com/hubfs/TALANTON/arrow-down.png) How do I determine whether related businesses are considered affiliates for the purpose of applying for the PPP? - The general rules of affiliation rules can be found under 13 C.F.R. 121.301. There are 4 tests: - based on ownership (control of 50% or more of voting equity) - based on stock options, convertible securities and agreements to merge (considered to have a present effect on the power to control a concern) - based on common management (one or more officer/director/managing member or general partner controls the Board of Directors and/or management of another business) - based on identity of interests, including family members (individuals or firms that have identical business or economic interests) In determining whether affiliation exists, the SBA may consider other circumstances even if no single factor constitutes affiliation (13 C.F.R. 121.301(f)(5). - ![](https://www.webxpertos.com/hubfs/TALANTON/arrow-down.png) Are there any exceptions to the affiliation rules specifically related to the PPP from the CARES Act? - Yes, affiliation is waved for the following: - businesses with fewer than 500 employees that is assigned a NACIS Code starting with 72 (hotels, bars, restaurants) - businesses operating as a franchise that are assigned a franchise identifier code by the SBA ... SBA Paycheck Protection Program #### Forgiveness of loan --- - ![](https://www.webxpertos.com/hubfs/TALANTON/arrow-down.png) When does the 8 week period begin to determine the amount of the forgiveness for the PPP loan? - The 8 week period begins on the date the lender makes the first disbursement of the loan. The lender must make the first disbursement of the loan no later than 10 calendar days from the date of the loan approval. - ![](https://www.webxpertos.com/hubfs/TALANTON/arrow-down.png) What are the acceptable uses of the PPP funds for businesses other than self-employed individuals? - Payroll costs, health care benefits, mortgage interest payments, rent, utility, interest payments on debt incurred prior to February 15, 2020, and/or refinancing an SBA EIDL loan made between January 31, 2020 and April 3, 2020. - ![](https://www.webxpertos.com/hubfs/TALANTON/arrow-down.png) What are the acceptable uses of the PPP funds for self-employed individuals? - - Owner compensation replacement (calculated based on 8/52 of 2019 net profit from Form 1040 Schedule C) - Employee payroll costs (as defined by the interim rule) - Business mortgage interest payments on real/personal property - Business rent payments - Business utility payments - Interest payments on debt obligations incurred before February 15, 2020 - Refinancing an SBA EIDL loan made between January 31, 2020 and April 3, 2020 Note that the individual must have claimed or be entitled to claim a deduction for the included expenses on 2019 Form 1040 Schedule C. - ![](https://www.webxpertos.com/hubfs/TALANTON/arrow-down.png) What amounts will be eligible for forgiveness for self-employed individuals? - The amount of the loan forgiveness will depend on the amount spent during the 8 week period on: - Payroll costs as defined by the interim rule (does not include benefits for owners) - Owner compensation replacement (limited to 8/52 of 2019 net profit and excluding any qualified sick or family leave equivalent amount for which a credit was claimed under FFCRA) - Interest payments on mortgage obligations for real/personal property incurred before February 15, 2020 - Rent payments on lease agreements in force before February 15, 2020 - Utility payments under service agreements dated before February 15, 2020 *Note that for interest, rent and utility payments, the amounts must be deductible on Form 1040 Schedule C. - ![](https://www.webxpertos.com/hubfs/TALANTON/arrow-down.png) Are employee federal withholdings and employer payroll taxes on wages for the 8 week period included in payroll costs? - The employee federal withholding is included in allowable payroll costs for the purposes of determining the amount to be forgiven. The employer federal payroll taxes (i.e. FICA and Medicare taxes) imposed on the gross payroll are not eligible payroll costs for the loan forgiveness calculation. - ![](https://www.webxpertos.com/hubfs/TALANTON/arrow-down.png) What are the restrictions on determining the amount of loan forgiveness for businesses other than self-employed individuals? - At least 75% of the loan proceeds must be used for payroll costs. If salaries decrease by more than 25% for any employee who made less than $100,000 annualized in 2019 OR if the number of FTEs decreases, the forgiveness amount will be reduced. A loan calculator to assist in the determination of the forgiveness amount will be coming soon. - ![](https://www.webxpertos.com/hubfs/TALANTON/arrow-down.png) Do qualified sick and family leave wages which are eligible for a tax credit under the FFCRA count toward payroll costs for the purpose of the forgiveness portion? - For businesses that take this credit, the wages will be excluded from the determination of payroll costs. - ![](https://www.webxpertos.com/hubfs/TALANTON/arrow-down.png) What about if the business had employees who left for their own reasons? Or need to be fired due to performance issues? Is the loan forgiveness still reduced for those employees? - More guidance is needed on this issue. As the statute is written in the CARES Act, the forgiveness is tied to employee count comparisons and also specific employees and whether their pay was substantially reduced.  - ![](https://www.webxpertos.com/hubfs/TALANTON/arrow-down.png) Are the expenses when determining forgiveness on a cash or an accrual basis? - More guidance is needed on this issue. The guidance provided discusses “payments”, but further clarification is needed. - ![](https://www.webxpertos.com/hubfs/TALANTON/arrow-down.png) Are these expenses tax deductible if the loan is ultimately forgiven? - More guidance is needed on the treatment of the expenses related to the forgiveness portion of the loans. Based on what is known at this time, there is no specific provision in the CARES Act that makes these expenses nondeductible. However, IRC Section 265 may apply which states that no deduction is allowed for expenses attributable to tax-exempt income. - ![](https://www.webxpertos.com/hubfs/TALANTON/arrow-down.png) Is the forgiveness of the loan taxable income? - No, the forgiveness of the loan does not constitute taxable income. - ![](https://www.webxpertos.com/hubfs/TALANTON/arrow-down.png) Are payments to related parties (such as rent) included in amounts eligible to be used to determine forgiveness? - More guidance is needed in this area. - ![](https://www.webxpertos.com/hubfs/TALANTON/arrow-down.png) What documentation is required to be submitted to the lender for self-employed individuals to support loan forgiveness? - The following documentation is required: - certification that the documentation provided is true and correct and the amount for which forgiveness is required was used to retain employees, and make interest, rent and utility payments - If the self-employed individual has employees, Form 941 and state quarterly tax reporting forms or equivalent payroll processor records that correspond to the covered period - Evidence of business rent, mortgage interest payments or utility payments for loan proceeds used for these purposes - 2019 Form 1040 Schedule C ... SBA Paycheck Protection Program #### Relationship between PPP and other SBA loans --- - ![](https://www.webxpertos.com/hubfs/TALANTON/arrow-down.png) Can a qualified entity apply for both the PPP and other SBA disaster loans? - Yes, borrowers may apply for the PPP and other SBA financial assistance, including disaster loans and Section 7(a) loans. However, you cannot use the proceeds from the PPP for the same purpose as your other SBA loan(s). Loan proceeds would need to cover payroll for a different period or other qualifying costs. This includes the up to $10,000 grant available with the Section 7(b)(2) loans- Economic Injury Disaster Loans (EIDL). - ![](https://www.webxpertos.com/hubfs/TALANTON/arrow-down.png) What happens if a business applies for PPP and also receives the up to $10,000 grant from an EIDL? - The amount of grant received (up to $10,000) will reduce the forgiveness amount of the PPP. - ![](https://www.webxpertos.com/hubfs/TALANTON/arrow-down.png) The CARES Act included a deferral of the employer portion of the social security tax until 2021/2022. Is this affected by a business’ participation in the PPP? - Yes. The deferral of the employer portion of the social security tax is not available to participants in the PPP. See [IRS FAQs #4](https://www.irs.gov/newsroom/deferral-of-employment-tax-deposits-and-payments-through-december-31-2020) for the details of how the deferral works. ... ### Please Note:  We are actively monitoring the COVID-19 (Coronavirus) situation and will continue to share important details as they become available. Please do not hesitate to reach out at any time using the [Contact Us](https://info.portebrown.com/en-us/covid-19-contact-us?hsLang=en-us) form. 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