I received my PPP loan….now what?

First, congratulations! Iowa, and the Midwest in general, were lucky to have a great amount of funding for eligible businesses requested and received. Many other areas of the country were not as fortunate! 

Now, down to the good stuff: as we know it today (which is changing constantly – and I mean CONSTANTLY!!!), to gain 100% forgiveness on your PPP loan, your funds have to be used at minimum 75% for payroll, and the other 25% can be filled with rent, utilities, or mortgage interest over the 8 weeks from when you receive the funds. We suggest that you make a big note on your calendar for 6 weeks from receipt to evaluate where you’re at and review your expense documentation, and again 8 weeks from receipt to gather that last bit of documentation and send that back in to your bank!

Just as a reminder, PPP payroll costs include:

  • Gross wages paid to employees, limited  to a maximum of $100k annualized salary per employee
  • Contributions made to employee retirement accounts by your company (not the portion withheld from an employee’s payroll check – that would be included in Gross Wages above)
  • Health insurance by your company for employees (again, not the portion withheld from an employee’s payroll check – that would be included in Gross Wages above)
  • State taxes paid on wages that are the employer’s responsibility (in Iowa that means unemployment tax)
  • There are a few specific items excluded from gross wages, including wages used to calculate payroll tax credits under the Families First Coronavirus Response Act, wages paid to employees not located in the US, etc. If you have a situation that is leaving you doubtful, ask your advisor!
  • 8/52 of your 2019 net income, limited to $100k, if you were self-employed (business filed Sch. C or Sch. F)

Rents, Utilities, Interest Details:

  • All expenses must be incurred on contracts that started before 2/15/20
  • Utilities do include the following business expenses:
    • Electric
    • Gas- We assume that this means natural gas/propane to heat your business building, yet in the interim guidelines for self-employed individuals this includes gas for your vehicle, which is an interesting twist – maybe this is the “transportation” below?
    • Water
    • Phone 
    • Internet
    • And a slightly undefined “transportation” expense, per the law. 
    • For self-employed individuals, utility costs are limited to only those that you also deducted on your 2019 tax return 
  • Rent
    • Appears to cover leases of equipment as well as building rent
  • Interest
    • Includes mortgage interest (not principal) as well as interest on other debt that was in place before 2/15/20

Just as a reminder there are also rules in place regarding reductions in staff in relation to loan forgiveness. Two comparative time periods (one 2020, one 2019) are available to determine this reduction as compared to your 8 weeks of PPP loan forgiveness, and there is also the chance that even if your staff is reduced during the 8 weeks, as long as you are fully staffed by 6/30 this will not reduce your PPP loan forgiveness (but keep in mind that wages paid in the 8 weeks still are a major part of the calculation of forgiveness!)

As always, if you have questions or concerns, please reach out to us! 

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