Learn how reducing pay to your employees could impact your forgiveness amount and how to estimate pay reductions for purposes of the PPP Loan Forgiveness Estimator.
When you apply for forgiveness, you need to include information on any relevant salary or wage reductions. Once you have calculated this information, you can include these amounts in the PPP Loan Forgiveness Estimator.
|Note: Because the Estimator relies on salary and wage information you calculate and input into the tool, your actual reduction and forgiveness amount may differ, and will be determined following rules set by SBA and Treasury.|
In general, your loan forgiveness amount may be reduced if you reduce the average annual salary or average hourly wages for certain employees during the Loan Forgiveness Covered Period (or, if applicable, your Alternative Payroll Covered Period) by more than 25% as compared to Q1 2020 (January 1, 2020 and March 31, 2020).
Determine what employees and wage reductions to include
There are a few important things to consider when reviewing your pay reductions and determining which to enter into the PPP Loan Forgiveness Estimator. You will need to exclude certain employees and certain wage reductions, as these will generally not reduce your loan forgiveness amount. As you go through the steps described in the next section, do not include the following:
- Employees that made more than the annualized equivalent of $100,000 based on any pay period in 2019
- Employees whose principal residence is outside of the United States.
- Independent contractors, owner-employees, self-employed individuals or partners.
- Reductions to salary or hourly wages made between February 15, 2020 and April 26, 2020 if the reductions are reversed by the earlier of (i) the date you submit your application for loan forgiveness or (ii) December 31, 2020, or June 30, 2020.
- You will need to go through the steps described below to determine whether there was a reduction in the wages for a particular employee.
Determine your pay adjustment
Now that you know which salary and hourly wages and which employees to include in your pay adjustment, let's estimate what your pay adjustments are.
Step 1: Identify specific reduction for each employee
In order to estimate whether there are salary or wage reductions that impact your loan forgiveness amount, you need to figure out whether there have been salary or hourly wage reductions for each of your employees.
Step 2: Add all your employees’ reductions
After you’ve calculated all your employees' specific reductions, you need to add them all together to get your total estimated pay reduction amount. Once you determine your total pay reduction amount, you can enter this number into your PPP Forgiveness Estimator within QuickBooks.
Regulations and guidance from the SBA and the U.S. Department of the Treasury on the PPP are evolving rapidly and the above information may be outdated. Please refer to the latest guidance from SBA and Treasury to confirm current program rules and how they apply to your particular situation.
The funding described is made available to businesses located in the United States of America and are not available in other locations.
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