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Understanding your QuickBooks Desktop Cash compensation report for PPP Loan Forgiveness

by Intuit Updated 1 year ago

The Cash compensation report for PPP Loan Forgiveness reflects certain cash compensation identified in your QuickBooks account based on the time period you select.

Before you use the data in this report in connection with a Paycheck Protection Program (PPP) Loan Forgiveness Application, make sure to read and understand the important information below regarding how we identified the cash compensation on this report, how it may include costs that are not eligible for PPP loan forgiveness, and what adjustments you should make when applying for PPP loan forgiveness.

Before applying for PPP loan forgiveness, you must review this report and determine whether it includes cash compensation amounts that are not eligible for forgiveness. Learn more about PPP loan forgiveness, including which payroll costs are eligible for forgiveness.

Borrowers will be asked to certify that costs claimed for forgiveness in their PPP Loan Forgiveness Application are eligible for forgiveness. Regulations and guidance from the SBA and the U.S. Department of Treasury on the PPP are evolving rapidly. Please refer to the PPP Loan Forgiveness Application, Application Instructions, and the latest guidance from SBA and Treasury to confirm current program rules and how they apply to your particular situation.

Time period used for this report

The Cash compensation report for PPP Loan Forgiveness uses the time period you select for purposes of your PPP Loan Forgiveness Application (“selected period”). You should select a time period consistent with the SBA’s guidance on payroll costs eligible for forgiveness.

Each borrower has a Loan Forgiveness Covered Period (LFCP). Cash compensation is eligible for forgiveness if (1) paid in your LFCP (even if incurred before the LFCP), or (2) incurred in the last pay period of your LFCP and paid by the next regular payroll date. Costs incurred after your LFCP won’t be forgiven.

Your LFCP generally begins on the date when you received your loan proceeds from the lender. Your LFCP may end on any date you choose between 8 and 24 weeks after your LFCP start date.

Paychecks included in this report

This report contains 3 tables:

  • Cash compensation
  • Prorated cash compensation
  • Total eligible cash compensation

The Cash compensation table (table 1) lists paychecks in your QuickBooks account with a paycheck date falling within your selected period. This includes paychecks dated on the start or end date of your selected period.

The Prorated cash compensation table (table 2) lists paychecks in your QuickBooks account where the pay period start date is within your selected period but the paycheck date falls after your selected period. If there is more than one such paycheck per employee, this table will only include the paycheck with the earliest paycheck date. Where applicable, the cash compensation amount for paychecks in this category is prorated as follows:

((Total cash compensation/days in the payroll period)*days of the pay period that fall on or before the end of your selected period)

The Total eligible cash compensation table (table 3) adds up the cash compensation for each employee from tables 1 and 2 and applies an annualized cap of $100,000 per individual prorated for your selected period.

The report is limited to paychecks for individuals whose address is in the United States and for which the pay date or pay period overlaps with your selected period. The report includes paychecks associated with non-owner employees, and in some cases, owner-employees and other owners, to which different caps apply. The report identifies each person’s name as recorded in QuickBooks, the pay period covered by the paycheck, and the date on each paycheck. You must review the explanation below regarding how this report may be over-inclusive of costs eligible for forgiveness and make any necessary adjustments before you apply for forgiveness.

Cash compensation included in the report

“Cash compensation” shown on tables 1 and 2 includes the following categories of cash compensation included on the relevant paycheck or pay stub:

  • Gross salary, gross wages, gross tips, and gross commissions, except to the extent you have identified such wages as wages paid to retain employees under the Employee Retention Credit provided for in (1) section 2301 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act (as amended), or (2) section 3134 of the Internal Revenue Code (as added by the American Rescue Plan Act of 2021).
  • Paid leave (vacation, family, medical or sick leave), except to the extent you have identified those wages as qualified sick and family leave wages covered by the Families First Coronavirus Response Act (FFCRA)
  • Allowances for dismissal or separation pay

Where a pay period associated with a given paycheck or pay stub ends after your selected period, we estimate the amount of the cash compensation earned in the selected period. We do this by dividing the cash compensation amount by the total number of calendar days in the pay period (including weekends and holidays) and then multiplying by the number of calendar days in the pay period that fall in your selected period. This amount is shown in the “Prorated cash compensation” column.

Cap on individual employee cash compensation

The third table sums up, for each individual listed on tables 1 or 2, cash compensation amounts associated with all paychecks included on table 1 and the prorated cash compensation amount associated with any paycheck included on table 2.

Under PPP Guidance, the total amount of cash compensation eligible for forgiveness per individual employee may not exceed an annual salary of $100,000, as prorated for the LFCP. For an 8-week LFCP, that total is $15,385 (($100,000.00/52)*8). For a 24-week LFCP, that total is $46,154 (($100,000.00/52)*24). Note, we apply a cap based on the length of your selected period. If your selected period does not align with full week periods (e.g. the period is 23 weeks and 4 days), we apply a cap by rounding down to the nearest whole week (($100,000.00/52)*23).

The sum of the cash compensation and prorated cash compensation amounts after applying the employee-cash compensation cap is shown in the Total eligible cash compensation column. Different caps apply to owners, which you must separately apply.

Guidelines for interpreting and using this report

To comply with SBA certification requirements and other rules, borrowers must ensure that the payroll costs claimed in their PPP Loan Forgiveness Application are eligible for forgiveness, that those costs were used to retain employees, and that they have verified the payments.

This report may contain costs ineligible for forgiveness, including cash compensation for individuals whose principal place of residence is not in the US and tips and commissions paid by someone other than the borrower. In addition, the report includes qualified sick and family leave wages or wage equivalents covered by the FFCRA, and wages that may be eligible for the Employee Retention Credits provided for in (1) section 2301 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act (as amended), or (2) section 3134 of the Internal Revenue Code (as added by the American Rescue Plan Act of 2021), to the extent included in your account but not identified by you as such. This report may also include qualified wages eligible for the Qualified Disaster Employee Retention Credit under section 303 of the Taxpayer Certainty and Disaster Tax Relief Act of 2020. Wages may be the basis for one of the above discussed FFCRA or employee retention credits or PPP forgiveness but not both. Wages for which you claim a credit under the employee retention credits or qualified disaster employee retention credit will become ineligible for those credits if they are included in a loan forgiveness application and contribute to the forgiveness amount granted. If such wages are both the basis for forgiveness and taken into account to claim the above credits, additional tax, interest, and penalties may apply. Wages or wage equivalents for which you claim a credit under the FFCRA are not eligible for forgiveness. You must review the report for and exclude amounts from your forgiveness application that are ineligible for loan forgiveness or that you wish to use for employee retention credits or the FFCRA credit rather than loan forgiveness.

Payroll costs are considered incurred on the day the employee’s pay is earned and are considered paid on the day that paychecks are distributed or the borrower originates an ACH credit transaction. You must review for and exclude any costs that were not paid in your LFCP or incurred in the last pay period of your LFCP and paid by the next payroll date. You will also need to determine whether the proration methodology used here produces an accurate result for your business.

If your LFCP extends beyond your history with QuickBooks Payroll, you’ll need to provide some additional payroll information to complete your forgiveness application.

As noted above, we have applied forgiveness caps applicable to individual employee compensation. There are different caps that apply to owner compensation. For example, total owner compensation is capped at 2.5 months’ worth (2.5/12) of an owner-employee or self-employed individual’s annual compensation (up to a maximum $20,833 per owner in total across all businesses), with 2019 generally being used for First Draw PPP Loans made in 2020 and 2020 being used for First Draw PPP Loans made in 2021 and Second Draw PPP Loans. There are additional caps for owners that depend on whether the business is an S-Corporation, C-Corporation, Partnership, Schedule C filer, Schedule F filer or an LLC. QuickBooks does not have a designation for owners, so this report does not distinguish between owners and non-owners. You must review and exclude any compensation in excess of the caps that apply to owners.

QuickBooks has provided this report to assist borrowers applying for forgiveness of their PPP loans. This report should not be considered financial, legal, accounting or other advice, or a substitute for obtaining advice specific to your business.

Your actual forgiveness amount will be determined by your lender following rules set by SBA and Treasury.

Documentation Requirements

Borrowers may need to provide certain forms of documentation verifying payment of payroll costs. Please review the SBA’s PPP Loan Forgiveness Application and Instructions, depending on which application you are submitting, to understand the list of documents that each borrower must submit and/or retain in connection with a PPP Loan Forgiveness Application.

Please also consult with your lender to understand any additional documentation your lender may require.

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