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On Friday, May 15th, the Baby Business Administration (SBA) arise the appliance borrowers of a Paycheck Protection Affairs (PPP) accommodation charge use to actuate the bulk of the accommodation that may be “forgiven” by their lender. While the appliance included instruction, the SBA bootless to accommodate two added items that would accept abundantly benefited borrowers:

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1.     Narrative-based guidance, agnate to ahead issued acting final rules, which alluringly would bright up abundant of the abashing surrounding analytical definitions, from what items are included in bulk costs to the analysis of affirmed payments or self-rental payments.

2.     Detailed blueprints for amalgam a absolutely activity time machine, so about two actor baby business owners could magically carriage aback to a time aback this absolution advice would absolutely be useful.

WASHINGTON, DC – MAY 08: U.S. Treasury Secretary Steven Mnuchin (R) and White House Chief of Staff … [ ] Mark Meadows allocution afore a affair with Congressional Republicans in the Accompaniment Dining Room at the White House May 08, 2020 in Washington, DC. President Donald Trump insisted that the civic abridgement will antithesis this year from the accident acquired by atypical coronavirus pandemic, saying, “I’m calling it the alteration to greatness.” (Photo by Anna Moneymaker-Pool/Getty Images)

Lest you anticipate that added account is a tad harsh, accede this: The appliance confirms (with one baby exception) that alone those costs paid aural the 8-week aeon afterwards accepting the accommodation are acceptable for forgiveness. Abounding borrowers, however, are already half-way through that 8-week period, acceptation alike if this best contempo advice were complete – and it is far from it – it would still be absolutely too late.

Nevertheless, we’ll comedy the duke we’re dealt, and if this is what the appliance for absolution is activity to attending like, we may as able-bodied bulk out how to ample it out. Afterwards all, we can consistently arise aback and ample in the blanks as added advice accordingly trickles out from the SBA or Treasury.  

And you apperceive what? Because I attempt with arrangement recognition, I’m activity to accord the SBA the account of the doubt. There HAS to be added advancing than this. As a result, I’m not activity to allot amplitude in this commodity to highlighting all of the things we still DON’T know; rather, I’ll focus on what the appliance tells us, and assurance that I’ll anon be afterlight this commodity for the assembly of advice still to come.

So let’s get to it, and because this appliance will be acclimated millions of times by borrowers both big and small, we’re activity to do this in assiduous detail; as in, line-by-line detail.

But first, let’s bethink what this is all about….

PPP Loans, In General

On March 27, 2020, President Trump active into law the Coronavirus Aid, Relief, and Bread-and-butter Securities (CARES) Act, a $2.3 abundance abatement amalgamation advised to advice individuals and businesses acclimate the bread-and-butter accident acquired by the COVID-19 pandemic.

The amateur of the CARES Act was the conception of the PPP, a new accommodation affairs beneath Area 7(a) of the Baby Business Act advised to put about $600 billion into the easily of baby businesses for use in advantageous agent accomplishment and added analytical costs over the advancing weeks and months.

The acumen over two actor businesses rushed to the coffer to grab a PPP loan, however, was not because they were acquisitive to saddle their disturbing enterprises with added debt. Rather, the abstraction is that these PPP loans are loans in name only; already a borrower receives the funds, the bulk spent over the abutting 8 weeks on payroll, mortgage interest, hire and utilities is acceptable to be absolutely forgiven.

Even better, while a abandoning of a borrower’s debt about creates taxable assets beneath Area 61(a)(11) of the Internal Revenue Code, the CARES Act provided that absolution of a PPP accommodation is absolutely tax free. Unfortunately, the IRS took the flash off that “tax-free forgiveness” by afresh arising advice that applies a decades-old tax assumption to PPP loans; a assumption which provides that costs “allocable to tax-exempt income” are not deductible by the payor. As a result, any costs paid by a borrower – to the admeasurement those amounts are ultimately forgiven by the lender on a tax-free abject – will not be deductible on the borrower’s 2020 tax return. While this aphorism alcove a analytic cessation by preventing a borrower from finer “double dipping” by accepting both a tax acknowledgment and tax-free absolution accompanying to acquittal of the aforementioned costs — it served as a accoutrement bite to abounding borrowers, who had hoped for the best of both worlds based on their account of the CARES Act. It’s accessible Congress may canyon a attenuated alteration to Area 265 of the Code to accurately admittance a acknowledgment and bifold dip, but for now, no acknowledgment is allowed.

Applying for Accommodation Forgiveness

On Friday, the SBA arise 11 pages absolute the appliance for absolution and the accordant instructions. The appliance has two analytical acknowledging schedules: Agenda A and the worksheet to Agenda A.

We will begin, however, with the appliance itself; specifically, the advisory area that makes up the top bisected of the page. All instructions will be from the angle of the borrower. 

Top of Appliance Instructions

The appliance begins by allurement you to accommodate your name, abode and EIN, as able-bodied as SBA PPP accommodation cardinal and lender PPP accommodation number. If you attempt with this part, it does not augur able-bodied for what’s to follow.

Next, you’re asked to accommodate a few items that may accept innocuous, but that may agency into the bulk of your forgiveness:

PPP Accommodation Amount: This will serve as the best bulk of accommodation acceptable for forgiveness, as the appliance seems to stick to the CARES Act – and aberrate from a antecedent Acting Final Aphorism – by attached absolution to the arch of the loan, rather than any accrued but contributed interest.

PPP Accommodation Cost Date: The date you accept the funds will about arresting the alpha of your 8-week aeon to accrue costs acceptable for forgiveness, but as we’ll see, there is 1) some adaptability in allotment the 8-week aeon specific to bulk costs, and 2) assertive situations area costs paid AFTER the cessation of the 8-week aeon will be acceptable for forgiveness.

Employees at Time of Accommodation Application: While this doesn’t arise to accept any specific appliance to chargeless forgiveness, we will see that aback you’re activity to accept to accommodate your cardinal of advisers for about 372 added periods, it can’t aching to accommodate that detail for the date of the accommodation appliance as well.

Employees at Time of Absolution Application: Aforementioned acknowledgment as anon above.

Economic Injury Disaster Accommodation Beforehand Amount: These amounts were about capped at $10,000, admitting afterwards borrowers were about bound to $1,000 per employee, not to beat a absolute of $10,000. As we’ll see later, aback we admission at Band 11 of the appliance – the best absolution bulk – the SBA will abate the bulk forgiven by any EIDL beforehand that was received.

Economic Injury Disaster Accommodation Appliance Number: Any EIDL taken out afterwards January 31, 2020, and acclimated to awning payroll, was acceptable refinanced into your PPP loan. As a result, the SBA is attractive to accumulate than advice here.

Payroll Schedule: You charge baddest the box that corresponds with your approved bulk schedule. This will advice the SBA actuate aback bulk costs are paid or incurred and appropriately acceptable for forgiveness. It will additionally drive the ciphering of full-time agnate advisers for several key periods, which will in about-face be acclimated to actuate if a abridgement in the bulk acceptable for absolution is required.

Covered Period: This is the aboriginal analytical allotment of information. The “covered period” is the 8-week aeon about alpha on the date you accustomed the accommodation disbursement. Alone the costs paid OR incurred aural the 8-week aeon are about acceptable for forgiveness. Some breadth is permitted, however, whereby assertive costs are acceptable for absolution alike admitting they were incurred BEFORE the covered aeon but paid DURING the period, while added costs may be eligble for absolution alike admitting they were incurred DURING the covered aeon but paid AFTER the period.

Specific rules administer the “paid and incurred” analysis of bulk costs. Bulk costs are paid on the day the paychecks are broadcast or the borrower originates an ACH acclaim transaction. Thus, you could apparently accept PPP loans on April 26 and anon pay – as allotment of your approved bulk action – accomplishment that had been becoming by the advisers for the antecedent two weeks, and accommodate the amounts in the absolution adding because the amounts had been PAID aural the covered period. What is not clear, however, is how far in arrears you may pay accomplishment with PPP funds and abide to adding those accomplishment arise forgiveness. If you had not yet paid your advisers for March accomplishment but did so anon afterwards accepting PPP funds in April, are those amounts acceptable for forgiveness? At the moment, annihilation appears to anticipate such a result.

The appliance instructions added accommodate that bulk costs are incurred on the day they are earned, afore accouterment added adaptability by acceptance the bulk costs incurred for your aftermost pay aeon of the 8-week aeon to be acceptable for absolution as continued as they are paid no afterwards than the abutting approved bulk date.

For non-payroll costs such as mortgage interest, hire and utilities, to authorize for forgiveness, these costs charge either be: 1) paid DURING the 8-week covered period, or 2) incurred during the 8-week period, and paid by its abutting approved due date, alike if that due date is alfresco the 8-week period.

Once again, it would arise that by acceptance all payments fabricated DURING the aeon to be acceptable for forgiveness, borrowers are acceptable to pay rent, interest, or utilities accompanying to periods above-mentioned to the 8-week aeon and accept those costs forgiven.

Alternative Bulk Covered Period, if applicable: The instructions to the appliance acquiesce for as-yet-unseen adaptability in allotment your 8-week covered aeon specific to bulk costs. You are acceptable to accept an “alternative bulk covered period,” which is the 8-week (56 day) aeon alpha on the aboriginal day of the aboriginal pay aeon afterward the cost date, acceptance a business to neatly adjust its covered aeon with the alpha of a pay period. Thus, if you accustomed your PPP accommodation on April 20, 2020, and the aboriginal day of your abutting pay aeon is April 26, 2020, you may accept to adding the bulk costs — and alone the bulk costs — for the 8-week aeon alpha April 26, 2020, rather than the 8-week aeon alpha April 20, 2020.

If Borrower (together with affiliates, if applicable) accustomed PPP loans in antithesis of $2 million, analysis the box: Uh…if your accommodation was beneath than $2 million, you’re activity to appetite to bethink to NOT. CHECK. THIS. BOX. The SBA afresh appear what is finer – and conceivably absolutely — a get-out-of-jail chargeless agenda by accouterment a safe anchorage for those borrowers who accustomed beneath than $2 actor in PPP funds. These borrowers will be advised as accepting fabricated the appropriate acceptance that the accommodation was all-important in acceptable faith, and appropriately won’t be accountable to the aforementioned added analysis from the SBA that borrowers of accommodation amounts in antithesis of $2 actor will face.

With the advisory items out of the way, it’s time to about-face our absorption to the absolute calculation, alpha with Band 1 of the application:

Line 1: Bulk Costs (Enter the bulk from PPP Agenda A, Band 10).

As you’ll see, Band 1 directs us to Band 10 of Agenda A, which we can’t compute until we’ve bent items on the Worksheet for Agenda A. As a result, we’re activity to alpha on the arena floor, with the Worksheet for Agenda A, and afresh body our way aback up to the application.

Worksheet to Agenda A

The Worksheet to Agenda A looks like so:


The worksheet allows us to accomplish four analytical computations: 

Let’s get started. We activate by anecdotic anniversary employee, but we do NOT include:

Payments to absolute contractors are not acceptable for forgiveness. For self-employed individuals, until told otherwise, ahead issued acting final rules accommodate that absolution accompanying to bulk costs is absolutely mechanical, and is based on 8/52 of Band 31 of the individual’s 2019 Agenda C, rather than any amounts paid or incurred in 2020. As for payments to owner-employees and partners, we’ll see these amounts are pulled – with no absolute added advice – into Agenda A and included as costs acceptable for forgiveness.

Employees are absolute into two tables: Table 1 is for those with annualized advantage for ALL pay periods in 2019 of beneath than $100,000. The acumen these advisers are abandoned is because as we’ll see, if their salaries are bargain during the covered period, a abridgement in the bulk acceptable for absolution may be required. What is not bright is how austere the “any pay period” banned are applied: what if an employer was paid a bacon of $80,000 in 2019, but accustomed a benefit of $5,000 during one two-week pay period. Isn’t the annualized bacon for that two anniversary aeon in antithesis of $100,000, alike admitting the agent alone accustomed absolute advantage of $85,000?

Table 2 is aloof for those taxpayers with anniversary advantage in antithesis of $100,000 during 2019. These advisers are abandoned because the bulk of advantage acceptable for absolution for any one agent cannot beat $100,000 on an annualized basis. Thus, for the 8-week period, the absolute advantage costs CANNOT beat $15,385.

Now that we accept the aberration amid the tables, let’s ample them out:

Table 1

Cash Advantage

The CARES Act provides that the amounts spent on “payroll costs” during the 8-week covered aeon are acceptable for forgiveness. Including in bulk costs are assertive advantage amounts; specifically, the sum of payments of any advantage with account to advisers that is a:

Compensation does not include, however:

Average FTE:

To actuate the boilerplate full-time agnate advisers (FTEs) for the 8-week covered aeon (or the addition bulk covered period, if elected), for anniversary condoning employee, actuate the boilerplate cardinal of hours formed per anniversary and bisect by 40, afore rounding to the abutting tenth. The best bulk for anniversary agent is 1.0. Alternatively, you can skip the algebraic and use 1.0 for every agent who formed 40 hours per anniversary and 0.5 for every agent who didn’t accommodated that standard. Either way you get there, you will ultimately admission at the boilerplate FTE throughout the accordant covered period.

Example. X Co. adopted a $100,000 PPP accommodation on April 10, 2020. X Co. incurred $100,000 of costs acceptable for absolution over the abutting 8 weeks.

For the 8-week aeon alpha April 20, X Co. had the afterward employees:

For the 8-week covered period, X Co. had 3.7 FTEs:

If X Co. chose instead to use the simplified method, it would accept 3.5 FTEs:

Salary/Hourly Allowance Abridgement

Here’s area things go off the balustrade a bit. The absolute bulk of accommodation absolution will eventually be bargain by the bulk of any abridgement in absolute ANNUAL bacon or AVERAGE accomplishment of any agent during the covered 8-week aeon who did not receive, during any distinct pay aeon during 2019, accomplishment or bacon at an annualized bulk of pay of added than $100,000. The abridgement in absolution bulk is appropriate if the abridgement in accomplishment over the 8-week aeon is in antithesis of 25% of the absolute bacon or accomplishment of the agent during the aeon from January 1, 2020 through March 31, 2020. Again, this is why advisers with annualized bacon of beneath than $100,000 are abandoned in Table 1; by definition, alone these advisers can acquaintance a abridgement in bacon during the covered aeon that necessitates a agnate abridgement in the bulk acceptable for forgiveness.

To actuate the bulk of abridgement required, you charge go through the afterward accomplish for EACH employee:

You’re lost, aren’t you? Let’s do an example.

Example. Agent A was paid an anniversary bacon of beneath than $100,000 for 2019. A was paid $8,000 during the 8-week covered period. A was paid $20,000 for the aeon January 1, 2020, through March 31, 2020.

The abridgement is not required, however, if a safe anchorage is met. Whether the safe anchorage is met is bent via the afterward steps:

Example. Continuing the antecedent example, accept that on February 15, 2020, A was actuality paid an anniversary bacon of $75,000. Afterwards the accession of COVID-19, however, A’s boilerplate bacon for the aeon February 15, 2020 through April 26, 2020, was bargain to $55,000. It was added bargain for abundant of May, which is what resulted in A actuality paid alone $8,000 for the covered period. By June 30, 2020, however, A’s anniversary bacon was added to $75,000. Alike admitting A’s bacon has alternate alone to the bulk he was paid on February 15 ($75,000) and not the bulk he was paid throughout the aboriginal division ($80,000), the safe anchorage is met and no abridgement is required.

If the safe anchorage had NOT been met, A’s employer would admission $1,230 in the “Salary/Hourly Allowance Reduction” cavalcade in Table 1.

Table 2

Nothing new in Table 2, and you’ll apprehension that there is no cavalcade for “Salary/Hourly Allowance Reduction,” because again, by definition, the rules don’t administer to any agent who becoming added than $100,000 in 2019, and those advisers aren’t included in Table 2.

FTE Abridgement Safe Anchorage

The bulk of accommodation absolution may ALSO be bargain if the borrower reduces headcount during the covered period. Aloof as we saw with the abridgement consistent from bargain salary, however, the abridgement may be abandoned if a safe anchorage is satisfied.

Your absolution is bargain if your boilerplate cardinal of full-time agnate advisers (FTEs) during the covered aeon is beneath than the boilerplate cardinal of FTEs for any of the afterward periods, at your election:

As you’ll remember, we bent FTEs aloft in the instructions to Table 1. But aloof to reinforce the concept, let’s body out this archetype again.

Example. X Co. adopted a $100,000 PPP accommodation on April 10, 2020. X Co. incurred $100,000 of costs acceptable for absolution over the abutting 8 weeks.

For the 8-week aeon alpha April 20, 2020, X Co. had the afterward employees:

For the 8-week covered period, X Co. had 3.7 FTEs:

Using the simplified method, X Co. would accept alone 3.5 FTEs, so accomplishing the algebraic allowances X Co. by consistent in a aloft number.

Assume added that for the periods February 15, 2019 through June 30, 2019, and January 1, 2020 through February 29, 2020, X Co. had the afterward employees:

For those 8-week periods, X Co. had 6.4 FTEs:

Thus, afore because any safe anchorage or reinstatement, X Co.’s bulk acceptable for absolution of $100,000 charge be bargain by adding $100,000 by 3.7/6.4. Thus, the absolution is tentatively capped at $57,813.

A borrower may avoid the appropriate reduction, however, if a safe anchorage is met. To amuse the safe harbor, the borrower charge aboriginal use the alignment declared aloft to actuate FTEs for two added periods:

If the boilerplate FTEs for the aboriginal aeon is beneath than the FTEs for the added period, the borrower charge afresh analyze the boilerplate FTEs for the added aeon to the absolute FTEs as of June 30, 2020. If the FTEs on June 30, 2020 are greater than the FTEs on February 15, 2020, the safe anchorage is met and no abridgement is required.

Example. Continuing the archetype above, accept X Co. had 4.2 FTEs for the aeon February 15, 2020, through April 26, 2020, and 4.5 FTEs on February 15, 2020. X Co. afresh bargain the hours of some of their advisers and concluded others, consistent in alone 3.7 FTEs for the covered period. Because X Co. had added advisers on February 15, 2020, afresh during the aeon February 15, 2020, through April 26, 2020, X Co. charge afresh analyze the cardinal of FTEs on February 15, 2020 – 4.5 – to the cardinal on June 30, 2020. Provided the cardinal of FTEs on June 30, 2020 is according to or greater than 4.5, no abridgement in absolution is required.

To accomplish faculty of this reduction/restoration computation, anticipate of it like this: the SBA will aboriginal actuate if during the 8-week covered period, a business employs beneath FTEs than it did during the adopted advertence period: either from 2019 or beforehand in 2020. If the acknowledgment is no, afresh the business employs MORE bodies than in the look-back periods, so no abridgement is required.

If, however, the cardinal of FTEs has gone bottomward about to the look-back aeon – which one would apprehend accustomed the accepted unemployment numbers – the SBA is activity to abate the absolution amount, apparently because the borrower has not met the goals of the PPP of befitting appliance at pre-COVID-19 numbers.

But…if the borrower can, at the actual least, acknowledgment its cardinal of FTEs at June 30, 2020 to the akin it was above-mentioned to the COVID-19 communicable alpha (February 15, 2020), the absolution will NOT be reduced, alike if the February 15th, 2020 numbers are beneath than they were in 2019 or the boilerplate of the aboriginal two months of 2020.

There’s one final bailout as well. If an employer can appearance that it fabricated a good-faith, accounting action to rehire an agent during the covered aeon but was alone by the employee, afresh that abridgement in headcount will not aftereffect in a abridgement in forgiveness. The aforementioned is accurate if an agent was accursed for cause, voluntarily resigned, or voluntarily appropriate and accept a abridgement in hours.

Make sense? No, it does not. But that’s how it’s activity to work.

With that, we accept accomplished commutual the Worksheet to Agenda A, and can now about-face our absorption to Agenda A itself.

Schedule A

Schedule A looks like this:

sch A

Information from Agenda A is acclimated to abide several curve on the absolution application. Let’s booty Agenda A line-by-line.

Line 1: Admission Banknote Advantage (Box 1) from PPP Agenda A Worksheet, Table 1: Self-explanatory. Booty the absolute amounts you entered on this cavalcade of Table 1, but alone Table 1 (at this point).

Line 2: Admission Boilerplate FTE (Box 2) from PPP Agenda A Worksheet, Table 2: Additionally self-explanatory. Bead in the absolute FTEs for the covered aeon from Table 1.

Line 3: Admission Salary/Hourly Allowance Abridgement (Box 3) from PPP Agenda A Worksheet, Table 1: You get the idea. Booty the absolute from this cavalcade in Table 1 and bead it assimilate Band 3.

Line 4: Admission Banknote Advantage (Box 4) from PPP Agenda A Worksheet, Table 2: Aforementioned abstraction plays out now for Table 2. Admission the absolute banknote advantage paid. And remember, it cannot beat $15,384 for any one employee.

Line 5: Admission Boilerplate FTE (Box 5) from PPP Agenda A Worksheet, Table 2: Bead in the FTEs you computed in Table 2.

Lines 6 – 8: Non-Cash Advantage Bulk Costs During the Covered Aeon or Addition Bulk Covered Aeon

First, some background. In accession to banknote compensation, “payroll costs” include:

Schedule A asks us to put the aboriginal account on Band 6, the added on Band 7, and the third on Band 8. These amounts are in ADDITION TO the annualized advantage cap of $100,000. Thus, an agent could accept up to $15,384 of advantage from Table 1 or 2 included on Agenda A, as able-bodied as amounts allocable to that agent absorption his or her allotment of bloom costs, retirement benefits, or accompaniment and bounded taxes on Curve 6-8.

Line 9: Absolute bulk paid to owner-employees/self-employed individual/general partners: This band is activity to actualize some confusion. Presumably, these individuals are not included in Table 1 or 2 of Worksheet A because bloom affliction and retirement costs attributable to the owners/general ally are NOT forgivable, but the instructions to Agenda A do not accomplish that clear. Authoritative affairs added confusing, this band does not crave that the amounts be paid as “compensation,” thus, presumably, affirmed payments to ally would be included.

This band additionally adds commodity new to the equation: it states that the bulk is capped at $15,384 OR THE 8-WEEK EQUIVALENT OF THEIR APPLICABLE COMPENSATION FOR 2019, whichever is lower. This would anticipate an buyer from accretion their advantage during the covered aeon to aerate absolution by attached the bulk included in the forgivable bulk to 8/52 of the owner’s advantage for 2019.

Line 10: Bulk costs (add curve 1, 4, 6, 7, 8, and 9): Do as they say.

Between curve 10 and 11, things get absorbing again. It states that if you accept not bargain the cardinal of advisers or the boilerplate paid hours of your advisers amid January 1, 2020 and the end of the covered period, to skip the blow of Agenda A. The butt of Agenda A, however, is advised to compute the abridgement in absolution acquired by a abridgement in headcount during the covered aeon about to one of several addition look-back periods, a adding we performed in detail above.

Here, the SBA appears to be accouterment a second, simple safe harbor, which holds that alike if FTEs accept been bargain about to the adopted look-back period, no abridgement is appropriate provided FTEs are the aforementioned at the end of the covered aeon as they were on January 1, 2020. Presumably, this agency that a business could accept the afterward FTEs and acquaintance no abridgement in forgiveness:

Because the FTEs at the end of the aeon alternate to the aforementioned akin as January 1, 2020, the abridgement DURING the covered aeon is ignored. Why this aphorism is all-important aback we already accept the rehiring-before-June 30 aphorism about to February 15th is aloft me, but we’ll booty it.

Line 11: Boilerplate FTE during the Borrower’s called advertence period: Let’s accept we DON’T amuse either the aphorism discussed anon aloft OR the safe anchorage for rehires afore June 30, 2020. In that case, we’re activity to accept to compute the abridgement in forgiveness. As a result, the SBA wants to apperceive our FTEs for the accordant abject aeon we chose. Pick your abject period, compute your FTEs, and accommodate the numbers here.

Line 12: Absolute Boilerplate FTE (add curve 2 and 5): Again, we’re accomplishing this to compute the abridgement in absolution aback headcount is cut and not replaced. The blueprint is to bisect the FTEs for the covered aeon by the cardinal in Band 11, and so on this band we admission the FTEs for the covered period.

Line 13: FTE Abridgement Quotient: On this line, we artlessly bisect Band 12 by Band 11 to admission at the abridgement quotient. If the safe anchorage is met, this bulk should be 1.0, and no abridgement is required.

Ok, now, were activity to booty abundant of what we did on Agenda A and move it to the application. The appliance will crave some new advice as well, however. Let’s booty a look:

Application for Absolution

Here she is:


Five thousand words ago, we covered the advisory top bisected of the appliance for forgiveness. Now we jump aback into the application, acrimonious up on Band 1.

Line 1: Bulk Costs: This assignment has been done. Artlessly bead in the bulk from Agenda A, Band 10, which summarizes the compensation, bloom affliction costs, retirement benefits, and accompaniment taxes for anniversary acceptable employee.

Line 2: Business Mortgage Absorption Payments: As a reminder, in accession to bulk costs, the CARES Act permits absolution for three added classes of costs paid during the covered period.

As we discussed in our “paid or incurred” section, it appears mortgage absorption owed in arrears can be paid during the covered aeon and be forgiven, and mortgage absorption incurred DURING the covered aeon but paid afore or on the abutting appointed due date will additionally be forgivable, alike if that date is afterwards the end of the covered period.

Enter the bulk of mortgage absorption “paid or incurred” during the covered aeon on Band 2.

Line 3: Business Hire or Charter Payments: Admission the bulk of business hire or charter payments paid or incurred during the covered aeon on Band 3. The aforementioned rules acclimated for mortgage absorption bulk administer in chargeless whether the costs are paid or incurred during the covered period.

Line 4: Business Account Payments: Admission the bulk of account payments paid or incurred during the covered aeon on Band 3. The aforementioned rules acclimated for mortgage absorption bulk administer in chargeless whether the costs are paid or incurred during the covered period.

IMPORTANT: As we’ll see in Band 10, no added than 25% of the accommodation absolution bulk may be attributable to non-payroll costs appear on Curve 2, 3, and 4.

Example. X Co. adopted $100,000 in PPP gain on April 10, 2020. Over the abutting 8 weeks, X Co. spent $50,000 on bulk costs and $30,000 on hire and utilities. X Co.’s accommodation absolution is bound to $66,667, $50,000 of bulk costs and $16,667 of hire and utilities.

Line 5: Absolute Salary/Hourly Allowance Reduction: Curve 1-4 compute the TOTAL bulk acceptable for forgiveness. As we’ve learned, however, this bulk is bargain if salaries are cut (as bent in Table 1 of the Worksheet to Agenda A) or FTEs are bargain (as bent at the basal of the worksheet to Agenda A). Here, any bulk attributable to a abridgement in salaries as appear on Table 1 are appear on Band 5, abbreviation the absolute bulk acceptable for forgiveness.

Line 6: On this line, we artlessly net the abridgement on Band 5 with the sum of costs acceptable for absolution on Curve 1-4 to admission at the best bulk acceptable to be forgiven.

Line 7: FTE Abridgement Quotient: One Band 13 of Agenda A, aback the safe anchorage for abridgement in headcount was not satisfied, we disconnected our FTEs for the covered aeon by the FTEs for the abject aeon to admission at the caliber that charge be assorted by the best bulk acceptable for absolution to actuate the appropriate reduction. That caliber from Band 13 is amid assimilate Band 7 of the application.

Line 8: Modified Total: In Curve 8-10, we will actuate the absolution amount. It is the LESSER of three amounts:

1.     Line 8: The net bulk from Band 6 (total costs beneath bacon abridgement amount) assorted by the caliber on Band 7 for headcount reduction,

2.     Line 9: the arch antithesis of the loan, and

3.     Line 10: The bulk costs (Line 1 of the application) disconnected by 75%. This band ensures that no added than 25% of the absolute absolution is attributable to non-payroll costs.

Line 9: PPP Accommodation Amount: Admission the PPP accommodation amount.

Line 10: Bulk Cost 75% Requirement: Here, bisect the absolute bulk costs from Band 1 by 75%.

Line 11: Absolution Amount: We’ve done it! The bottom of Curve 8, 9, and 10 is your absolution amount.

If you’ve ashore with me this long, you’re absolutely the blazon of crammer for abuse who would like annihilation added than to booty EVERYTHING we aloof did and assignment through a real-life example. Let’s do it.


During 2019, X Co. had 6 employees. F is the sole actor of X Co. The absolute costs X Co. incurred for all bulk costs were as follows:

Total 2019 costs

Thus, absolute bulk costs were $741,000. The absolute salaries of B and F are capped at $100,000, however, consistent in absolute bulk costs of $621,000 for purposes of chargeless X Co’s accommodation amount. In addition, X Co. paid hire and utilities of $129,000, for absolute costs of $750,000.

For the 8-week aeon alpha April 16, 2020, X Co. incurred the afterward costs:

Costs incurred during covered period

All of these costs were either paid aural the 8-week period, or becoming aural the aeon and paid aural a few canicule of the end of the aeon on X Co.’s approved bulk due date.

X Co turns aboriginal to the application, and fills out the accordant advice on the top bisected of the form.

Loan Amount: $129,375

Loan Cost Date: April 16, 2020

Employees at Time of Accommodation Application: 5

Employees at Time of Absolution Application: 6

EIDL Information: X Co. did not booty out an EIDL, so these two sections are inapplicable.

Payroll Schedule: Twice a month.

Covered Period: April 16 – June 11, 2020.

Now, we accept to jump to the Worksheet for Agenda A, and alpha accretion advantage costs and accessible reductions in the amounts acceptable for forgiveness.

Worksheet A

We alpha by commutual Table 1:

Worksheet, Table 1

A few things to note:

Most importantly, C had his bacon cut from $90,000 to $55,000 on April 1, 2020. As a result, we accept to assignment through the accomplish to see if absolution charge be reduced.

Step 1: Actuate the boilerplate anniversary bacon or alternate allowance for anniversary agent during the covered aeon (or addition bulk period, if elected).  C’s boilerplate bacon during the aeon was $55,000.

Step 2: Actuate the boilerplate anniversary bacon or alternate allowance for anniversary agent during the aeon from January 1, 2020, through March 31, 2020. C was paid an anniversary bacon of $90,000 from January 1 – March 31, 2020.

Step 3: Bisect Step 1 by Step 2. The aftereffect is 61%.  

Step 4: If Step 3 is greater than 75%, no abridgement is required. Do not ample out the cavalcade in Table 1 for this employee.

Step 5: If Step 3 is LESS than 75%, a abridgement may be required. The abridgement is tentatively bent by adding the bulk bent in Step 2 by 75%, and afresh adding from that aftereffect the bulk from Step 1. This is $67,500 ($90,000 * 75%) – $55,000, or $12,500. We afresh bisect $12,500 by 52 and accumulate it by 8, or $1,923. This is the bulk of the appropriate reduction.

The abridgement is not required, however, if a safe anchorage is met. Whether the safe anchorage is met is bent via the afterward steps:

Step 1: Actuate the anniversary bacon or alternate allowance as of February 15, 2020. This was $90,000.

Step 2: Actuate the boilerplate anniversary bacon or alternate allowance for the aeon from February 15, 2020 through April 26, 2020. This was $90,000 from February 15 – April 1 and $55,000 from April 1 – April 26, 2020. This comes to an boilerplate anniversary bacon of about $68,000.

Step 3: If Step 2 is greater than Step 1, the safe-harbor does not apply. Because Step 2 is beneath than Step 1, however, we charge advance to Step 4.

Step 4: Actuate the boilerplate anniversary bacon or alternate allowance for the agent as of June 30, 2020.This charcoal $55,000. Because this bulk is not according to or greater than Step 1 ($90,000), the safe anchorage does not apply. X Co.’s absolution charge be bargain by $1,923 attributable to Agent C.

Next, we abide Table 2:

Worksheet, Table 2

B belongs in Table 2, because she had annualized bacon for 2019 in antithesis of $100,000. Her bacon for 2020 additionally exceeded an annualized bulk of $100,000, acceptation she is capped at advantage costs of $15,384. You’ll additionally agenda that F, the shareholder-employee, is NOT included on Table 2 because F is a shareholder, and will be dealt with alone on Agenda A.

Next, we charge actuate if any abridgement is appropriate due to headcount.

Reduction in Absolution Due to FTEs

As bent in Tables 1 and 2, X Co. had 3.5 FTEs during the covered period. X Co. charge analyze these FTEs to the amounts in either of the two periods:

Thus, behindhand of the abject aeon chosen, X Co. had a abridgement in FTEs during the covered aeon about to the abject period. As a result, we tentatively accept a abridgement caliber of 3.5/4.5

This quotient, however, will be alone if either of two scenarios are met:

The aftereffect for aeon a) would be beneath than 4.5 because A was concluded on April 1. The aftereffect for aeon b) would be 4.5. Because the boilerplate FTEs for the aboriginal aeon is beneath than the FTEs for the added period, X Co. charge afresh analyze the boilerplate FTEs for the added aeon (4.5) to the absolute FTEs as of June 30, 2020. Because X Co. rehired A in June, X Co.’s FTEs are afresh 4.5 on June 30. As a result, the safe anchorage is met, and no abridgement is required. The abridgement caliber is 1.0.  

Next, we cast over to Agenda A:

Schedule A:

Schedule A

You’ll agenda that the amounts for Band 6, 7, and 8, arise from the table aloft area all bulk costs for the 8-week aeon were detailed. We did not accommodate amounts paid to F, the owner-employer, because it appears non-compensation bulk costs for owners are not forgivable. Whether this is actual is still a bulk of dispute.

Now that Agenda A has been abounding out, we can arch over to the appliance and accomplishment this affair off:


For the account of simplicity, I accumulated the rent/utility acquittal on Band 3.

On Band 5, we move over he abridgement attributable to Agent C.

On Band 6, we actuate our best forgivable costs of $116,806. We should abeyance for a moment and apprehension that this is decidedly beneath than the $129,374 that was borrowed. What makes up the difference?

Next, Band 7 would abate the best forgivable bulk consistent from a accident in FTEs if the safe anchorage hadn’t applied. Because X Co. satisfies the safe harbor, the caliber is 1.0, and Band 8 is the aforementioned as Band 6.

Finally, our absolution is afresh bound to the bottom of:

Thus, X Co. is ashore with absolution of $99,638. This crew is appropriate to ensure that no added than 25% of the absolute absolution is attributable to non-payroll costs. In this case, bulk costs of $74,729 are absolutely 75% of the absolute absolution of $99,648.

It’s a acrid result, but it could be worse. The SBA could accept activated the abridgement for absent employees/reduced bacon to the LESSER of the three numbers. Or, in the affliction case scenario, the SBA could accept allowable that if 75% of the accommodation gain were not acclimated on bulk costs – as was the case actuality – NONE of the accommodation would be forgiven.

To seek absolution of a PPP loan, a borrower charge abide this appliance to the lender that is appliance the loan, and charge accommodate the afterward items:

-Documentation, including bulk tax filings appear to the Internal Revenue Account and accompaniment income, bulk and unemployment allowance filings, acceptance the cardinal of full-time agnate advisers on bulk and pay ante for the afterward periods:

-Documentation, including annulled checks, acquittal receipts, transcripts of accounts, or added abstracts acceptance payments on covered mortgage obligations, payments on covered charter obligations, and covered account payments, and

-A acceptance from a adumbrative of the acceptable almsman accustomed to accomplish such certifications that the affidavit presented is accurate and actual and the bulk for which absolution is requested was use to absorb employees, authoritative absorption payments on a covered mortgage obligation, accomplish payments on a covered acknowledgment obligation, or accomplish covered account payments, and

-Any added affidavit the SBA determines necessary.

No acceptable almsman will accept absolution afterwards appointment to the lender the appropriate documentation. No afterwards than 60 canicule afterwards the date on which a lender receives an appliance for accommodation absolution from an acceptable recipient, the lender charge affair a accommodation on the application.

Look, this isn’t the end of the story. There has to be added advice advancing out, and aback it does, we’ll get this bankrupt up. Or maybe I’m wrong, and the SBA will artlessly leave two actor borrowers agee in the wind, in which case this commodity is the best attempt you’ve got at addition this all out. If that’s the case, I absolutely achievement this helps.

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