On Wednesday, June 10, 2020 SVO member PP&Co. presented on the next phase of the Paycheck Protection Program (PPP) Loan... applying for forgiveness. PP&Co.'s Senior Partner and CPA, Tom Wagstaff, addressed the eligible expenditures, loan period, FTE reduction/reinstatement, documentation and reporting, and how to maximize PPP forgiveness. Below are the Q&A's from his presentation.


1. If an employer maintains full headcount during the original eight-week period and is able to properly use the entire PPP loan during that time, will there be a consequence to a headcount reduction after the eight-week period ends? Will any of the forgiveness be in jeopardy if there is a reduction in force after the eight weeks is over but before the new 24 week period ends?

We believe the 24 week option was intended to increase # of borrowers that could qualify. The 8 week option was kept for those who played by original rules, loan should be forgiven. Do not believe future decline in FTE would jeopardize forgiveness.

2. Will the extension of time from eight to 24 weeks have an impact on Schedule C sole proprietors? Can they now request forgiveness for more than just the eight weeks of net income?

Still an open question needing guidance. They were giving Sched. C borrowers 75% as income replacement. Remaining 25% - just provide support for utilities, rent, other non payroll costs.

3. Best practice in allocating payroll to PPP when nonprofit has other funding sources that cover certain payroll costs, including multiple gov't grants and contracts.

To maximize forgiveness, use at least 60% of PPP proceeds on payroll costs. Make sure you are able to trace the PPP monies to payroll costs.

4. Can we get more than one PPP loan? We received one from our bank but could we another since they have extended the payback

No. Only one per business.

5. For self-employed, solo real estate agent with no employees and no rent/utilities, as broker absorbs these costs as I split my commission with them, it seems we can only use 75% of PPP to cover payroll to ourselves. How do you recommend spending the balance of funds in order to have total PPP forgiven?

For Self employed, they give you the 75% as income replacement. Keep non payroll records - include transportation and lease payments.

6. How does this effect unemployment?

You are only eligible for one. If you receive a PPP loan as a sole proprietor you are ineligible for unemployment insurance.

7. If you’ve received a PPP loan are you able to receive pandemic unemployment assistance?

No. One or the other.

8. Is fuel eligible as a transportation expense?


9. Is health insurance premium paid by employer included in the maximum payroll ($15,385) for an individual for forgiveness or can the health insurance premium paid by employer for an individual be included in the forgiveness amount over and beyond the $15,385?

The $15,385 is for salary and wages only. Employee benefits and SUI can also be included "above and beyond" as payroll costs.

10. My company worked throughout SIP since we are an essential business. However, I have a part-time employee who opted to temporarily stop work because he's at high risk. He still hasn't opted to come back to work. Will this affect how my PPP loan is forgiven?

Document that he has been offered his job and chose to leave. Have him document that he chose not to come back. Need both in writing according to the guidance.

11. Please talk about comparative base periods for summer-heavy staff in a very seasonal business.

FTE reduction rule for seasonal employee - use one of reference periods provided, OR a consecutive 12 week period between 5/1/19 and 9/15/19.

12. We have a top heavy 401K, can we use the PPP loan to fund this top heavy allocation and have it forgiven?

Need more guidance on this- appears ALL employer contribution will count if made in covered period.

13. We have semi-monthly payroll cycle (1-15 and 16 till end of month). Loan proceed received on 4/17/20 - 56 days ends on 6/11/2020.

1. Payroll for period 4/01/20-4/15/20 - Paid on 4/22/20: Can we count this payroll cost?

Yes, paid in covered period.

2. Payroll for period 4/16/20-4/30/20 - Paid 5/07/20: Can we count this whole payroll cost since the loan proceed received on 4/17/20

Yes, paid in covered period.

3. 56 days end on 6/11/20: Do we need to have separate payroll run from 6/1/20 to 6/11/20 to be included in the payroll cost and payroll from 6/12/20 to 6/15/20 need to be excluded?


4. If we choose the 8 week period, do we keep the 75/25 rule?

We think so, but awaiting guidance.

5. If we choose the 24 week period, do we have to maintain the FTE and payroll cost for the full 24 weeks? The proceeds will most likely be used up by 11 weeks.

We believe so. Awaiting guidance on whether they change reference period. Since numbers on application form are averages, likely you would need to maintain FTE level during 24 week period. Some may choose to stay with 8 week period if FTEs go down.

6. We paid utilities cost and bill back the third party contractor.  If we don't bill back the contractor for utilities, can the utilities we paid qualified as non-payroll cost?


7. If the University bills auxiliary facility fees as rent, can related party rent be forgiven?

Yes, we believe so.

14. With the extended forgivable spending period, will it be easier / less complicated to seek forgiveness by submitting payroll costs that are made up of 100% of payroll costs rather than payroll and other allowable costs (i.e. utilities, rent, etc.)?

Generally it will be easier because you have a longer time period to incur those payroll costs

15. Does submitting payroll costs that lost longer than the original 8 week period mean that we have to submit a longer time period than the comparison sample?

Awaiting guidance. Since the application form asks for average costs, perhaps they will stay with same reference periods.

16. For the 6/30 safe harbor rehire date, do you have to maintain the full employment level beyond that pay period for any length of time to guarantee forgiveness?

No rule for keeping past 6/30 right now. That restoration date is 12/31 now per new guidelines.

17. Does garbage service count as a utility?

Probably not. The CARES Act defines utilities as electricity, gas, water, transportation, telephone, or internet access for which service began before February 15, 2020, as expenses which qualify for loan forgiveness.

18. What if I already paid back part of our loan based on the old rules? We only kept what we knew would be forgiven based on the 75% payroll cap. Can we draw back some of those funds?

Call your bank, but our understanding is no, once you've repaid you cannot draw the funds.

19. If my 8 weeks is up next week and I have everything I need to send in for forgiveness, can I send it all in and get taken care of before something else changes?

Yes. You can elect to keep the 8 week period.

20. I am a sole proprietor. I made zero money in 2019, but have business expenses as I built up my business. I have a 1040 Tax Form. At the beginning of 2020, I work with 17 business partners to start our business but impacted by COVID-19. We are still struggling. Am I qualified for PPP?

If you have no employees and no income on your schedule C, then you are not eligible for a PPP loan. For schedule C filers the loan amount is based on the amount on Schedule C line 31.

21. Can you spend higher than 75% on payroll?

Yes, you can spend more than 75% on payroll costs.

22. The 8 weeks measuring period would be better for us than the 24 weeks. Can we use the 8 week period?

Yes, you can use the 8 week period.

23. Is it 8 weeks or 24? Or can it be anything in between 8 and 24 weeks as well?

You can elect to use the original 8 week period or go up to 24 weeks. So yes, anything between 8 and 24 weeks is ok.

24. If there is a change in the number of employees after the 8 weeks, does that mean we are better off using the 8 weeks period as opposed to the 24 week period?

Yes, if average FTE goes down after 8 weeks, just use the 8 week to max. forgiveness

25. Is it critical to keep the PPP funds in a separate account from the main checking account?

It is recommended. If not, keep detailed records of the amounts paid out.

26. What if you received income during the 8 or 24 week period but due to late invoice generation you received income in that period for amounts earned in 2019.

Income doesn't impact loan forgiveness. If you are Sole prop., you use 2019 net income for loan amount and 75% is automatically forgiven as income replacement.

27. Is the alternative period only for payroll not for rent or utilities?

The alternative period is for all payroll expenses. For non payroll, you can include payments during covered period, or incurred in covered period and paid by next due date.

28. Is the employee compensation eligible for forgiveness still capped at $100,000?  Does it still stop at $15,385 (for the 8 weeks)?  Or is it capped at $46,155 for 24 weeks?

We believe this number will now increase to $46155 if choosing 24 week period.

29. Is a pension a 403b?

For forgiveness, definition is amounts paid by borrower for employer contributions to employee retirement plans. If your 403b does this, then yes.

30. What if sole proprietor funds SEP IRA on a monthly basis. Is that considered eligible for “Pension Contribution?”

Not relevant. They automatically give S.P.s the 75% payroll cost as income replacement.

31. What if employer still has unfunded contributions from 2019?

We believe it counts, but awaiting guidance on all employer pension payment issues.

32. Are bonuses covered? Even if not per normal operation?

Bonuses are covered. But remember total annual compensation counts only up to $100k per employee.

33. What about a safe harbor match that happens weekly, does this qualify for a payroll cost?

We believe it does. But awaiting guidance on pension issues.

34. For construction companies like us, are monthly union contributions considered as payroll cost since they are based on the employee's working hours on union projects?

No. Besides cash compensation, only heath insurance, state unemployment and employer payments for pension plans count.

35. Health Insurance: we pay it monthly for the next month. Do you have to prorate to the exact covered period or is it ok to use the Paid or Incurred rule?

Health insurance is a payroll cost, and we believe paid and incurred rule applies to all payroll costs.

36. Does health insurance include expenses for employee dental coverage

Yes .

37. Is the health insurance only include employer portion or entire invoice (employee and employer)?

We are still waiting for guidance on whether health insurance paid for employer counts for forgiveness.

38. Workers compensation is a function of payroll. Is it, for forgiveness purposes, considered a payroll expense? Or can it be considered health insurance?

No. Worker's comp is not considered a payroll cost.

39. Since the PPP loan amount was calculated based on 8 weeks of expenses, and the covered period has now been extended to 24 weeks, wouldn't the safest thing be to only claim salaries and wages?

It is very possible with 24 week rule that payroll alone will trigger full forgiveness. But we are awaiting guidance on whether the reference period might change. Still Keep good records for your non payroll costs.

40. Can you use a covered period greater than 8 weeks but less than 24?

Awaiting guidance.

41. The way I read it, it is not the pay during the 8 or 24 week period...it is the reduction method that matters more. The payroll in 24 weeks can be much more than the loan, but still get reduced forgiveness based on the reduction rules. Is that right?

The application form asks for your total payroll costs (which will be much higher under 24 week rule) and then subtracts the reduction in loan forgiveness. So the 24 week rule still greatly increases chances to get loan forgiveness, even with a potentially larger amount of forgiveness reduction.

42. So for those that make less than 100k/year I can continue to pay them their base pay. There is no cap payout for them. For those that hit that 100k/year cap will be capped out after my 8 weeks until we hear from SBA?

Those that go over $100k will still be capped out. But we believe with new 24 week covered period, their forgiveness amount will go from $15k max to $46k max.

43. Can we wait until end of the year to choose whether to use the 8 or 24 week period?

We believe so.

44. What if the employee won't communicate with the employer?

Document your attempts to communicate.

45. What if we make the employee the offer but they never reply in writing? Some employees are choosing to have unemployment and not responding to calls and emails.

Document your attempts to communicate.

46. What happens if the employee ignores all communications to returns to work? Can silence be considered rejection of offer?

Document your attempts to communicate.

47. What if an employees earned tips but now just get their hourly rate with no tips, it this reduction of pay?

We believe you would compare the total in covered period (with no tips) to total amount with tips in reference period.

48. For returning payrolls to the 2/15 levels can that be earlier than 12/31? Can we choose a date?

The new law says if FTEs or salary are restored at any time prior to December 31, 2020.

49. If I received a PPP loan after I was awarded PUA (unemployment), what do I need to do to notify EDD to cease PUA payments? I’ve heard nothing— just don’t re-certify, and of heard otherwise.

As noted in presentation, you can't have PPP loan and take unemployment. But at this point, there is no process for those that do.

50. 40% Expenditures, for Rent, does land lease payments qualify?

We believe so. Guidelines say rent payment for business purposes.

51. Can the PPP loan can be used and forgiven on an employer contribution for a top heavy 401K penalty from 2019?

Awaiting guidance on most pension issues, but right now it appears all employer payments for employee pensions count.

52. What if employee count is reduced due to an employee being on maternity leave?

One of the safe harbors would apply.

53. If we get the loan forgiven in8 weeks. We will be paying large taxes and we expect to have large losses in 2021. Bad break on the taxes there.

Take advantage of new NOL carryback rules for trhe 2021 losses.

54. When can one submit the loan forgiveness application?

Talk to your lender. If you use the 8 week period, they may allow you to use the existing forgiveness application and submit now.

55. I rehired employees but I will run out of the funds after 10 weeks, What happen if I need to laid them off again?


56. If the total payroll is more for 24 weeks than 8 weeks, we could still be worse off using 24 weeks if there are less FTE by the end of the year, right?

It is possible given the way the application form is currently designed, because you reduce your payroll costs by FTE reduction quotient. But your eligible payroll costs will be so much higher, that the 24 week period will likely be beneficial to getting full forgiveness.

57. For the new relief due to inability to return to 2/15/20 level of activity...what if we were not able to return to that level because all our customers (office break-rooms)  that we service fell in that category, although our particular business (food) was not specifically impacted by CDC regulations


58. Covered period is now up to 24 weeks from 8 weeks to spend PPP loan and take full forgiveness correct?


59. Is that only for a car lease and not a car payment?

Car lease counts. Interest portion of car payment only.

60. You mentioned that garbage isn't considered a utility, is this correct that garbage isn't covered?

Probably not. The CARES Act defines utilities as electricity, gas, water, transportation, telephone, or internet access for which service began before February 15, 2020, as expenses which qualify for loan forgiveness.

61. Are auto loan payments included in the transportation expense?

Only interest portion. If loan existed prior to 2/15/2020

62. Are workers comp, life and disability insurance provided by the employer considered in the insurance expenses?

Not workers comp.

63. Is salary reduction calculated only for FTEs or for everyone (including part time employees)?

Yes, everyone.

64. What about how the EIDL works with the PPP? Do they affect the forgiveness at all?

Yes. If you received the $10k grant, that reduces your PPP forgiveness.

65. We received our EIDL funds after receiving our PPP loan funds. How will this affect our PPP loan forgiveness?

The EIDL and the PPP can technically not be used for same purposes - ideally do not use EIDL for payroll.

66. Is it recommended to incur the heavy expense of hiring a lawyer to make sure all the paperwork is correct? If so, what kind of lawyer?

No lawyer needed. Hire an accountant. We'll be happy to assist you.

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