Paycheck Protection Program

Also some states have concluded the expenses are not deductible for their state even though it was a federal grant. The Paycheck Protection Program Flexibility Act of 2020 changed adp ppp loan forgiveness calculator the payroll expenditure requirement. Businesses now must spend 60% of their PPP loan on payroll costs. The remaining amount of the loan can be used for non-payroll expenses.

• If the credit exceeds the employer’s total liability of the portion of Social Security or Medicare, depending on whether before June 30, 2021 or after in any calendar quarter, the excess is refunded to the employer.
• Don’t worry, if you’re a Bank of the West PPP customer, we’ve created the Forgiveness Assistant Form to help you through the standard application.
• It is important to note that the SBA has not yet given direct guidance on how to apply the policies behind loan forgiveness.
• These are assessments by state and local governments in certain parts of the country so there was some early confusion on this issue.
• On this page, you will see that in the first section you have the option to run a PPP report.
• I saw that the SBA released a version of the PPP Loan Forgiveness Application called “3508S.” How do I know if I can use that form?

You can apply for loan forgiveness through the lender that is servicing the loan. Lenders have 60 days to make a decision on loan forgiveness.

Repayment of Taxes for ADP Clients:

The guidance was clarified to explain transportation utility fees are the only transportation utility that qualifies. These are assessments by state and local governments in certain parts of the country so there was some early confusion on this issue. If you own an LLC, your salary calculation is based on whether your LLC is taxed as a C corp, S corp or partnership. The ownership type for your business also plays a role in your salary calculation.

For quicker responses, the Internal Revenue Service has implemented the Income Verification Express Service program which is an expedited service that lenders can use to confirm the income of a borrower during the processing of a loan application. Under IVES, the IRS can electronically provide tax return transcript generally within two business days to a third party with the consent of the taxpayer. An important component of Paycheck Protection Program loans that can be difficult for business owners to analyze is payroll calculation. This important number is used to determine your total PPP loan amount. This is where you enter the amount in total dollars that you reduced the employee’s wages but over the 25 percent threshold. If you did reduce the salary over the percentage, you will need to calculate these numbers first. The Coronavirus Aid, Relief, and Economic Security Act (H.R. 748, “CARES Act”) was signed into law on March 27, 2020.

General Tax Tips & News

The tax credit was set to apply to qualified wages paid after March 12, 2020. The amount of loan forgiveness can be up to the full principal amount of the loan and any accrued interest. The actual amount of loan forgiveness will depend, in part, on the total amount of payroll and other eligible costs over the eight-week period following the date of the loan. Due to high demand for PPP loans, a maximum of 40% of the loan amount used for eligible non-payroll costs is expected to be forgivable.

• On January 19, 2021, the SBA revised the 3 different versions of the PPP Loan Forgiveness application.
• This will be a one-hour presentation followed by 30 minutes of Q&A.
• Not sure why they’re backing out federal income tax or employee payroll taxes….
• If you have questions about this, you can reach out to an ERTC professional for more guidance.
• In general, borrowers can calculate their aggregate payroll costs using data either from the previous 12 months or from the calendar year 2019.

Form 3508S is intended to keep the forgiveness process simple. It contains fewer calculations and requires you to make certifications regarding how you used PPP funds as required by law. You will not be required to submit supporting documents, however, the SBA does require that you retain all loan forgiveness supporting documents such as employment records/payroll and non-payroll documentation for a https://adprun.net/ period of up to 4 years. If you use a payroll provider, tools are available to help you more easily calculate your payroll costs. Here are popular software companies offering payroll calculation information. For wages paid from January 1, 2021 through the applicable expiration date, the above thresholds increase to more than 500 full-time employees and 500 or fewer full-time employees, respectively.

Full-Time Equivalent (FTE) Reduction Exceptions

Note that the covered periods for your first and second draw loans cannot overlap. Before you can apply for PPP loan forgiveness, you’ll first want to make sure you’re eligible to apply. Be sure your covered period has ended and you know the PPP loan proceeds that were used for eligible costs. Employers who receive PPP loans may still be eligible for the tax credit to the extent qualified wages aren’t paid using forgiven PPP loan proceeds. Your maximum PPP loan amount will be 2.5 times your average monthly payroll costs, up to $10 million. You can only receive one PPP loan, so if you apply for a PPP loan you may consider applying for the maximum amount you are eligible for. Any health insurance premiums that you pay qualify for loan forgiveness.

The credit remains at 70% of qualified wages up to a $10,000 limit per quarter so a maximum of $7,000 per employee per quarter. So, an employer could claim $7,000 per quarter per employee through the first three quarters of 2021 after the passage of the Infrastructure Investment and Jobs Act changed the end date of the program for most businesses. However, Recovery Startup Businesses were eligible through the end of 2021. They could be eligible to take a credit of up to $50,000 for the third and fourth quarters of 2021. As mentioned earlier, there are specific criteria your business must meet in order to qualify for the credit. There are also wages that must be considered “qualified wages” to be eligible for the employee retention tax credit.

Eligible Employers:

The form also notes that an equivalent report from a payroll processor can be submitted with the FTEE calculation. Under the Consolidated Appropriations Act of 2021, also known as CAA, businesses impacted by quarantines or forced closures or who saw more than 20% of a drop in their gross receipts can qualify for employee retention credits. For newer businesses, the IRS provides guidance on how to use gross receipts for the quarter in which you started if you don’t have figures from 2019.

However, the IRS makes it clear that expenses eligible for PPP forgiveness that were not included in the loan forgiveness application cannot be factored in after the fact. The PPP loan forgiveness form gives borrowers the option to calculate payroll costs using an “alternative payroll covered period” that aligns with the borrowers’ regular payroll cycles. If the business processes payroll bi-weekly, they can begin the 8-week payroll covered period on the first payroll date following the date the PPP funds were received.

Paycheck Protection Program

For the latest information on loan forgiveness, visit our PPP Guide which includes a checklist, FAQs and examples. To estimate how much of your loan may be forgiven, use the tool below. Whether you’re ready to submit a PPP loan forgiveness application today or just want to get a ballpark figure, read on to learn the process of using Form 3508, and see an example.

Gross Payroll refers to the total amount that your employee receives from you. Total Payroll refers to the amount that it costs an employer to have an employee. This would include health benefits, retirement benefits, and employer portion payroll taxes, anything you pay above and beyond wages, bonuses, and tips. For the PPP, payroll processing fees and Workers Comp are excluded from Total Payroll.