Best Practices When Completing the Paycheck Protection Program Application
Buchbinder has reviewed the information provided by the Treasury, and below are our recommendations of how the Paycheck Protection Program (PPP) application is to be completed. We are using version 3245-0407 from the SBA.
- Check the type of Entity, fill in Legal name address, TIN, phone number, primary contact and email address.
- For purposes of calculating “Average Monthly Payroll,” most applicants will use the average monthly payroll for 2019 if in businesses as of January 1, 2019, excluding costs over $100,000 on an annualized basis for each employee. With respect to the “purpose of the loan,” payroll costs consist of the following:
- Wages, commissions or tips to employees (whose principal place of residence is the United States)
- Payment for vacation, parental, family, medical or sick leave; allowance for separation or dismissal
- Payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums, and retirement
- Payment of state and local taxes assessed on compensation of employees (i.e. SUI, SDI)
- For new companies beginning after January 1, 2019, the initial period starts from inception and the 12 month accumulated data needs to be adjusted based upon the number of months in operation before application date.
- “Number of Employees” needs to be adjusted to full-time equivalents (FTE). I.e. If an employee only worked 3 months in 2019, they are counted as ¼ of an FTE. Be careful and it is important not to overstate the FTEs, as it may materially impact the loan forgiveness calculation.
- Provide the names and information for all owners over 19.999%. They all need to be able to answer no to questions 1,2,5 & 6.
- Answer all required questions and attach any required addendums.
- The signer of the application must initial where required, and note the many certifications, under federal penalties, including the company’s need for this program. Please read the application thoroughly.
Paycheck Protection Program Application
Download the Borrower Application Form here.
What qualifies as “payroll costs”?
Payroll costs consist of compensation to employees (whose principal place of residence is the United States) in the form of salary, wages, commissions, or similar compensation; cash tips or the equivalent (based on employer records of past tips or, in the absence of such records, a reasonable, good-faith employer estimate of such tips); payment for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums, and retirement; payment of state and local taxes assessed on compensation of employees; and for an independent contractor or sole proprietor, wage, commissions, income, or net earnings from self-employment or similar compensation.
Is there anything that is expressly excluded from the definition of payroll costs?
Yes. The Act expressly excludes the following:
- Any compensation of an employee whose principal place of residence is outside of the United States;
- The compensation of an individual employee in excess of $100,000, prorated as necessary;
- Federal employment taxes imposed or withheld between February 15, 2020 and June 30, 2020, including the employee’s and employer’s share of FICA (Federal Insurance Contributions Act) and Railroad Retirement Act taxes, and income taxes required to be withheld from employees; and
- Qualified sick and family leave wages for which a credit is allowed under sections 7001 and 7003 of the Families First Coronavirus Response Act (Public Law 116–127).
Do independent contractors count as employees for purposes of PPP loan calculations?
No, independent contractors have the ability to apply for a PPP loan on their own so they do not count for purposes of a borrower’s PPP loan calculation.
US Treasury Publication
Download the US Treasury Interim Final Rule here.
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