PPP, EIDL, FFCRA FAQS from PPP Forgiveness & Employment Update Webinar for Business Owners

May 15, 2020
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These FAQs were generated in the May 14, 2020, webinar: PPP Forgiveness & Employment Update Webinar for Business Owners. Click here to watch the recording.

Questions on the Paycheck Protection Program (PPP)

1. What is included in “other debt” obligations?

These can be non-mortgage debts that was in place before 2.15.20.  We are hoping more guidance comes on this.

2. Mortgage loan INTEREST payments only, Not PRINCIPAL are allowed, correct?

Correct.

3. I received a PPP loan on April 21st. My payroll is done on the 20th of each month. So, my next two payrolls are May 20th and June 20th.  Should I move up my June payroll to the first week of June to meet the window requirements?

You will need to make sure the 2 payrolls are within the 8-week covered period.

4. What if I have the same number of employees before and through PPP loan time? Do we still need the FTE equation?

You will still need to supply the calculation to the bank.

5. When will we be able to request forgiveness?

You will be able to request forgiveness after the 8-week period.

6. Can the employer raise the salary of others to cover the reduction in overall employees during the measured period?

Yes, but a reduction of employees will reduce the FTE.

7. We were approved for the loan, but our bank told us that self-employed persons are NOT eligible for this loan. Can you clarify eligibility?

Yes, self-employed persons are eligible. They were not eligible to apply until April 10.

8. I thought only mortgage interest counts toward forgiveness; however, I believe you said interest on any debt? Can you confirm my understanding of that?

They added in “other debt obligations,” so it does not include just mortgage.

9. Can you quickly review the time period options to determine number of FTE, both prior and post-loan period?

Potential loan forgiveness amount x average FTEs per month employed during the covered period = Loan forgiveness amount divided by average FTEs per month employed between 2/15/19-6/30/19.

Potential loan forgiveness amount x average FTEs per month employed during the covered period = Loan forgiveness amount divided by average FTEs per month employed between 1/1/20-2/29/20.

10. With regards to the ruling on audits of loans over $2 million, do you know what the definition is of “necessity of loan request” and how that will be determined? ref. Q46 on SBA FAQs.

They haven’t fully defined the necessity of loan request. Being able to document why you needed the loan would still allow you to keep the loan over $2 million.

11. What if we have the same number of FTEs but one employee dropped off and another was added?

Then you would still maintain the FTE.  The actual individual employees don’t matter. Just the number.

12. Was PPP repayment pushed to May 18?

Yes, as of May 14 it was.

13. What if you have more employees after the loan than before the loan? Can you deduct the larger new payroll as long as it’s within the loan amount?

Yes, if you’re over 100% and have enough qualified costs you are all set.

14. If we have employees on leave under FCRAA, can they still count toward FTE, or do we have to replace them?

We understand that they would still qualify as they are still on payroll.

15. If I have employees that have been un-furloughed and have worked from home and now have to come back into the office and work and do not want to come back to work under current conditions, if they quit and this is documented will this affect my FTE amount?

As long as you have it documented that you offered them their position to come back and they declined, it will not affect your FTE amount as long as it is a minimal number of employees.

16. Are commissions and bonuses paid during the 8 weeks included in the forgiveness calculation?

Yes, they are.

17. Any guidance as to whether property taxes, etc. under a triple net lease qualifies as rent?

Only rent is covered. So, the property taxes wouldn’t be covered.

18. Is the 75% of wages for the forgiveness based on payroll dollars or employee count?

There are two 75% calculations. One based on total payroll costs to the total loan, and one based on employee count. Please see question #9 for calculation.

19. For sole owner LLCs can the owner, who took his PPP loan based on his net income from schedule C, divided by 12 , multiplied by 2.5, just submit one draw for the amount and call it good?

As we understand, yes.

20. On forgiven loan dollars, would it not be easier to recognize the forgiven dollars as income instead of reducing the costs they are for?

Hypothetically, it would be the same result, net zero. It would be easier record keeping to do this, it just has to be justified for the IRS.

21. If you’re a sole proprietor and you took your loan based off of $100,000 salary for 2.5 months (Total loan of $20,600) the max amount forgiven is $15,385 for just payroll, or can you have it all forgiven if you use the $15,385 for payroll and the remaining amount for other business expenses?

75% of funds must be used for employee compensation. Compensation includes gross payroll, employee benefits, and state and local employer taxes. For sole proprietor share, the “salary” is maxed out at $15,385. You can include the other payroll costs. It does not include employer FICA and Federal Unemployment.

25% may be used for the following expenses incurred during the period: Interest payments on mortgage obligations and any other debt obligations incurred before 2.15.2020
Rent payments on leases dated before 2.15.2020.

Utility payments under service agreements dated before 2.15.2020. Includes electricity, gas, water, transportation, telephone or internet (includes gas you use to drive your business vehicle).

22. If a small business has 7 employees who were furloughed, can the business owner apply for PPP to cover him/herself plus rent and utilities in a business that was classified as non-essential?

If those employees were employed during the time periods listed below, the loan forgiveness would be reduced by the percentage deduction in the workforce. Average FTEs per month employed between 2/15/19-6/30/19. Average FTEs per month employed between 1/1/20-2/29/20.

23. For self-employed – income is the only thing I based my PPP loan on – I have no rent, etc. – so it’s over the max $15,385. Should I pay back over-and-above that amount, or will it be forgiven since my loan app was based on lost income only?

You can pay back any amount not forgiven at any time during the loan terms. If you don’t have any other qualified costs the remaining amount can be paid back like a normal loan over 24 months. The calculation for the loan application is different than what they are considering for forgiveness so any difference would need to be paid back.

24. If we are not going to utilize all of the given funds during the time period, does it make sense to run an extra payroll in order to utilize the funds?

You can run extra payroll or have a bonus to use the additional funds.

25. You can use the PPP funds to pay existing debt but, that portion wont’ be eligible for forgiveness, right? 

They don’t trace the funds, but if you don’t have the qualified costs then it won’t be eligible for forgiveness.

26. We have a piece of equipment that we have a long-term lease purchase – is that forgivable?

Currently, the interest on this would be an allowable cost.

27. When will the PPP forgiveness applications be available from the bank?  Also, what will the deadline be?

We are hoping that this will be something soon!

28. Do we contact the bank directly for forgiveness?

Yes.

29. Any remaining funds after the 8 weeks can be used for any purpose and can be treated as a traditional loan?

It would be treated as a loan and then you would use the funds as loan. No restrictions that I have seen.

30. Since we are an LLC, the owners’ salary is not counted as payroll. Can we count our owners’ portion of salary towards the self-employed maximum?

Guaranteed payments made to the partners of an LLC would qualify toward the self-employed maximum. You are limited to the $100,000/52*8 (15,385).

31. We were instructed by the bank to borrow net proceeds of salary versus gross. Can the small balance left be used to pay any of the payroll taxes?

No. You have to use gross salaries in the calculation. You could bonus the remaining if needed.

32. Can leased employees or temporary employment agency cost be included in PPP qualified payroll costs?

If you are leasing from a company primarily engaged in leasing employees to other businesses or with a professional employer organization, then they would count towards your gross payroll.

33. So, if I let one employee go, could I promote a part time employee to full time? Is this worth doing?

Yes, you may. The number of employees rather than the same employees are used for the calculation. It would be worth doing, even if we can’t get it all forgiven, the proceeds would help.

34. Can I apply for my 1099 employees?

You cannot apply for contractors of yours that are self-employed. You can apply on yourself being self-employed. The independent contractors would have to apply for the PPP for themselves. You can only count W-2 wages or if you are applying under a Schedule C, you will be able to get either the lower of net income or $100,000 as an owner.

35. We are a retail business and received our loan in late April. I can bring back all employees on May 15, so can my 8 weeks start with that payroll?

For the PPP, the 8 weeks start with when you received the proceeds.

36. Would gasoline for our 3 company-owned vehicles that are used by our construction crews will be an allowable expense in regards to the PPP loan?

We are hoping there is more guidance coming on this.

37. I have an additional employee on my Paychex reporting and can bring him back on as well. Should I do that? Would his payroll help forgive the proceeds? My PPP arrived 5/4/20. I do one payroll session at the last day of each month. (From my calculations, I can continue doing that and do not need to move up any payroll.) Is that correct?

You can bring them back if you need another FTE or if they were in the prior year FTE.

38. If we have a hygienist who does not want to come back yet, may we pay her ahead of time even though she’s not working now?

You could use your PPP funds to pay them even if they are not working.  I would suggest contacting your attorney if you are wanting to pay in advance to make sure you don’t have any legal lability with a situation like this.

39. Is there a date for the PPP rules to be finalized?

No, they have been updating them one question at a time over the last several weeks.

 

Questions on the Economic Injury Disaster Loan program (EIDL)

40. What if you received the EIDL Grant after you received the PPP Loan? Is it still deducted from the forgivable amount of the PPP?

Yes, if it is a grant it will reduce the forgivable amount.

41. I am not clear on the EIDL loan. Do we need to use it for the same qualified expenses as we do for the PPP loan?

You may not use it for PPP expenses.

42. Can you use EIDL funds to refinance existing debt?

No, you may not use them to refinance existing debt.

43. If you have PPP and EIDL which then makes the EIDL a loan, which terms do you use for repayment? The 3.5 over 30 years or the 1% within 2 years?

The EIDL loan repayment terms are 30 years at 3.75%. The 2-year loan at 1% is for any portion of the PPP loan not forgiven (which includes the EIDL grant).

44. Can you please clarify how a company owner can get the EIDL loan forgiven?

The EIDL loan is not eligible for forgiveness. The PPP loan is eligible for forgiveness. If you received a EIDL grant and no PPP loan, then the grant portion does not need to be repaid.

45. What is the definition of “working capital” that can be used with the EIDL loan? We are purchasing extra oral suction, air purifiers, new equipment for COVID-19 needs. Is that “working capital”?

This would be considered working capital needs and would be allowed.

46. What is the impact of PPP and EIDL funds being received by different applicants/companies that have common ownership?

Unless they have specifically listed the related companies on the EIDL loans, then you wouldn’t have to co-mingle the funds.

47. If you get EIDL loan, you use the money for working capital, and you prepay any other debt, would that be considered a violation?

You can’t use it to refinance debt, but you would be able to make loan payments with the funds.

48. We originally applied for the EIDL Loan and Grant. We heard nothing back. We then applied for the PPP and received funding within 10 days. Then we just received a deposit in our account for the EIDL in the amount of $1,000 per employee. So, the way I am understanding this is, we will be required to pay back the EICL grant even though we will have used all of the PPP income for qualified expenses (payroll, rent, utilities etc.) If so, could we just pay back the grant instead of making loan payments for it?

That is correct.

49. To clarify, ONLY the EIDL or the PPP can be forgiven, correct?

Yes. Only an EIDL grant/advance or PPP can be forgiven.

50. Can we just pay back the EIDL Grant at any time in full without interest?

The EIDL grant can be paid back at any time without interest as long as it is before a loan is given or the PPP is forgiven.

51. Can EIDL advances be used for operating capital expenses? We also received PPP loan.

Yes, the EIDL advance can be used for operating capital expenses. The advance amount would be deducted from the eligible amount available for forgiveness through the PPP loan.

52. The EIDL is not a grant and must be paid back? What are the terms and how do you pay it back? We applied, received an email saying it was being processed. Today an SBA deposit appeared for $3,000. No other notices have been received. 

This would have been a grant. When you signed up for the EIDL loan, there is a grant piece (if eligible) and a loan piece.  The grant is given first and is just deposited into your account. You do not have to pay this back, unless you also have a PPP loan that is forgiven (then the payback is part of the loan forgiveness calculation). If approved for the EIDL loan, there would be loan paperwork sent to you that you have to sign electronically and that would be a loan at 3.75% interest payable over 30 years.

 

Questions on the Families First Coronavirus Response Act (FFCRA)

53. What does FTE stand for?

Full Time Equivalent employee.

54. For the Paid Sick Leave, must the EE use any of their PTO in order to receive?

On the paid sick leave, they don’t have to use PTO first.

55. Shared Work Program – I just got signed up and had an employee call in for two personal days this week. She was to work 24 hours and will only be working 15 this week. How do I manage reporting this week?

Can the EE use PTO to pay them up to the 24 hours? If not, she will likely be out of luck for that week.

56. If an employee is over 65, it sounds like they can stay home and still collect unemployment. Is that true?

The Kansas DOL will make a determination on a case by case basis.

57. Does Missouri have the same job refusal guidelines as Kansas? I have one team member who is 65 years old, and I’ve offered her work. If she does not want to come back, can she have unemployment?

Missouri and Kansas have similar guidelines for this.

58. How does FFCRA apply to commission-only employees? Employee’s wife was diagnosed with COVID and the employee had to quarantine. This employee continues to get commissions based on when jobs sold have paid, but he could not go out and get new sales.

The commissions paid would be calculated as part of the regular rate of pay for FFCRA. I would check with your payroll provider if they need any additional information to make this calculation.