Get Most Forgiveness for Your PPP Loan

Several organizations published guidelines on the “forgiveness” language from the CARES Act passed by Congress in April.  Most notably was the IRS and SBA’s interpretation of these guideline.  Here is a brief synopsis so that as a small business owner you can understand with what you must comply in order to get the maximum benefit of the forgiveness provision in the PPP loans.

• Congress designed the PPP to maintain the viability of millions of small businesses struggling to meet payroll and day-to-day operating expenses.
• The SBA will forgive the portion of loan proceeds used for payroll costs and other designated operating expenses for up to eight weeks.
• To Qualify for loan forgiveness at least 75% of loan proceeds are used for payroll costs. Eligible expenses for the eight-week forgiveness include:

1. Payroll costs (excluding the prorated portion of any compensation above $100,000 per year for any person. Payroll costs include salary, commissions, tips; certain employee benefits including sick leave and health care premiums, and state and local taxes.
2. Mortgage interest (notprepayment or principal payments) and rent payments on mortgages and leases in existence after February 15, 2020.
3. Utilities such as electricity, gas, water, transportation, phone and internet access for services that began before February 15, 2020.
4. Additional wages paid to tipped employees.

Remember, while this had been committed to writing by the IRS, Treasury, and Small Business Administration (SBA), there is plenty of room for change as this gets implemented. So, our best advice is stay fluid and document, document, document everything you do with the funds you received from the Paycheck Protection Program.

Here are some best practices to get you started while the government provides final direction to us all:

1. Put your funds in a separate bank account to make accounting easier
2. Keep records and receipts for every dollar spent
3. Make sure you are spending in the 4 areas listed above to maximize your loan forgiveness.

At BGS Bookkeeping our mission through all this was to help as many small businesses as possible get the help they needed to stay afloat.  Our mission going forward coming out of this crisis is to get your business back to profitable as quickly as possible. So, if you have questions or concerns about your specific situation then signup for a consult below.