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Paycheck Protection Program loan forgiveness

Learn how you can prepare for the Paycheck Protection Program (PPP) loan forgiveness.

If you're a recipient of a PPP loan, you may apply for forgiveness 8 weeks after your lender disbursed (sent) you the PPP funds. All or part of your loan may be forgiven, if you meet certain requirements.

The use of the PPP loan proceeds listed below pertain to the forgivable amount of a PPP loan, and are not the only allowable uses of a PPP loan.

Regulations and guidance from the SBA and the U.S. Department of the Treasury on the PPP are evolving rapidly and the below information may be outdated. Please refer to the latest guidance from SBA and Treasury to confirm current program rules.

Note: The amount of the loan forgiveness can be up to the loan principal amount plus accrued interest.
  • Principal: the sum of the PPP loan money you received.
  • Accrued interest: the interest on the PPP loan.

Here are some things you should consider:

How should I spend my PPP loan if I want it to be forgiven in full?

Use the PPP loan funds within the 8-week covered period

Your 8-week covered period typically begins on the date you received your PPP funds, or if you received your PPP funds on more than one date, the first date on which you received PPP funds. For example, if you received your PPP loan funds on Monday, April 20, the first day of the covered period is April 20 and the last day of the covered period is Sunday, June 14.

Alternative period for payroll costs: Solely for the purpose of calculating payroll (and certain required reductions), borrowers with biweekly or more frequent payroll may choose an “alternative payroll covered period” that aligns with your payroll cycle. The alternative payroll covered period begins on the first day of the first pay period following receipt of your PPP funds. For example, if you received your PPP funds on Monday, April 20, and the first day of your first pay period following receipt of your PPP funds is Sunday, April 26, the first day of the alternative payroll covered period is April 26 and the last day of the alternative payroll covered period is Saturday, June 20. If you choose to use this alternative period, it applies only to payroll costs and certain required reductions.

You don’t have to use all of your loan proceeds in these 8 weeks, however only eligible costs paid during the relevant 8-week period (and certain eligible costs incurred but not paid during the relevant 8-week period) are eligible for forgiveness. Costs incurred after this 8-week covered period won’t be forgiven.

Use 75% or more funds on eligible payroll costs

Eligible payroll costs include compensation for (non-owner) employees whose principal residence is the U.S., including:

  • Salary, wages, commissions, or similar compensation
  • Additional wages paid to tipped employees, if applicable
  • Employee benefits, such as PTO, allowance for employee separation or dismissal, insurance premiums, taxes, and retirement

Qualified sick and family leave wages covered by the Families First Coronavirus Response Act need to be excluded. Payroll costs paid during the relevant 8-week period (or incurred during the last pay period in the relevant 8-week period and paid on or before the next regular payroll date) are eligible for forgiveness. For each individual (non-owner) employee, the total amount of cash compensation eligible for forgiveness may not exceed an annual salary of $100,000, or $15,385 for the 8-week covered period.

Forgivable loan amounts paid to owner-employees, self-employed individuals, or general partners are limited to the 8-week equivalent of their applicable compensation in 2019, capped at $15,385. Sick and family leave wage equivalents under the Families First Coronavirus Response Act should be excluded from owner compensation replacement.

Use up to 25% of funds on other eligible business costs

  • Interest payments on business mortgage obligations for real or personal property incurred before February 15, 2020
  • Business rent or lease payments on leases pursuant to agreements for real or personal property in force before February 15, 2020
  • Business payments for the distribution of for electricity, gas, water, transportation, telephone, or internet access pursuant to service agreements dated before February 15, 2020

Eligible business costs paid during the relevant 8-week period (or incurred during the relevant 8-week period and paid on or before the next billing date) are eligible for forgiveness.

In order for Schedule C filers to seek forgiveness of these business costs, they must have been deductible on the 2019 Form 1040 Schedule C submitted with the loan application.

What factors can reduce my forgivable amount?

If you have employees, your loan forgiveness amount may be reduced as a result of reductions to employee headcount or wages.

Reducing the number of employees

Your loan forgiveness amount may be reduced if the average weekly number of full-time equivalent employees you employ during your 8-week covered period (or, if applicable, your alternative payroll covered period) is less than the average weekly number of full-time equivalent employees between:

  • February 15, 2019 and June 30, 2019, or
  • January 1, 2020 and February 29, 2020

Seasonal applicants may choose either of the above reference periods or any consecutive 12-week period between May 1, 2019 and September 15, 2019.

If reductions made between February 15, 2020 and April 26, 2020 are reversed by June 30th, 2020, your loan forgiveness amount will not be reduced.

Reducing employee salary or wages

Your loan forgiveness amount may be reduced if you reduce the average annual salary or average hourly wages for any employee during the 8-week covered period (or, if applicable, your alternative payroll covered period) by more than 25% as compared to Q1 2020.

If reductions made between February 15, 2020 and April 26, 2020 are reversed by June 30, 2020, your loan forgiveness amount will not be reduced.

This forgiveness reduction does not apply to reductions associated with employees who received compensation at an annualized rate of more than $100,000 for any pay period in 2019.

Economic Injury Disaster Loan Advance

If you received an advance through the EIDL program, it will be deducted from your forgivable amount on a PPP loan.

How do I apply for forgiveness?

If you're a PPP loan recipient, you will submit a PPP Loan Forgiveness Application to your lender or the lender servicing your PPP loan. Once you submit your application, the lender will determine your loan forgiveness eligibility.

Note: Once you submit your application for forgiveness, the lender will have 60 days to accept or deny your application.

Your PPP Loan Forgiveness Application must include the following documents verifying your payroll, full time employees, and non-payroll expenses:

Payroll expenses for the covered period or, if applicable, the alternative payroll covered period

  • Bank account statements or third-party payroll service provider reports documenting the amount of cash compensation paid to employees.
  • Payroll tax forms (or equivalent third-party payroll service provider reports) to demonstrate payroll tax filings reported, or that will be reported, to the IRS (typically, Form 941),
  • Tax forms (or equivalent third-party payroll service provider reports) to demonstrate state quarterly business and individual employee wage reporting and unemployment insurance tax filings reported, or that will be reported, to the relevant state.
  • Payment receipts, canceled checks, or account statements documenting the amount of any company contributions to employee health insurance and retirement plans that the borrower included in the forgiveness amount.
  • If applicable, the 2019 Form 1040 Schedule C submitted with your application.

Full-time employees during the reference period selected by the borrower

  • Documentation verifying the average number of FTEs on payroll per month employed by the borrower during the reference period selected by the borrower for purposes of assessing whether a reduction of the forgiveness amount due to an FTE reduction was required.
  • Documents may include payroll tax filings reported, or that will be reported, to the IRS and state quarterly business and individual employee wage reporting and unemployment insurance tax filings reported, or that will be reported, to the relevant state.

Non-payroll expenses

  • Business mortgage interest payments: Copy of lender amortization schedule and receipts or canceled checks verifying eligible payments from the covered period; or lender account statements from February 2020 and the months of the covered period through one month after the end of the covered period verifying interest amounts and eligible payments.
  • Business rent or lease payments: Copy of current lease agreement and receipts or canceled checks verifying eligible payments from the covered period; or lessor account statements from February 2020 and from the covered period through one month after the end of the covered period verifying eligible payments.
  • Business utility payments: Copy of invoices from February 2020 and those paid during the covered period and receipts, canceled checks, or account statements verifying those eligible payments.

EIDL Documentation

Although not specifically required by the PPP Loan Forgiveness Application, you should be prepared to provide documentation of any advance received under the CARES Act EIDL Emergency Grant program to your lender. As mentioned above, the amount of any EIDL advance will be deducted from your forgiveness amount.

Additional documentation you'll need to maintain

Borrowers are required to maintain all records relating to their PPP Loan and PPP Loan Forgiveness Application for 6-years after the date of forgiveness or loan repayment.

*The average number of full-time equivalent employees is determined by calculating the average number of full-time equivalent employees for each pay period falling within a month.

Paycheck Protection Program (PPP) loans offered within QuickBooks Capital may be made by Intuit Financing Inc. (d/b/a QuickBooks Capital) or by Cross River Bank, a New Jersey State Chartered Commercial Bank, Member FDIC. QuickBooks Capital is licensed as Intuit Financing Inc. (NMLS # 1136148), a subsidiary of Intuit Inc. In California, loans are made or arranged under CFL Licensed #6054856. Minimum loan amount varies by state. Intuit Financing Inc., (d/b/a QuickBooks Capital) is an authorized SBA Paycheck Protection Program Lender.

Loan and forgiveness calculations and eligibility may vary. Refer to the SBA.gov for information about your particular situation.

Coronavirus relief programs are evolving regularly. Please visit SBA.gov or https://home.treasury.gov/policy-issues/top-priorities/cares-act/assistance-for-small-businesses for the most up to date information.

The funding described is made available to businesses located in the United States of America and are not available in other locations.

This content is for information purposes only and should not be considered legal, accounting or tax advice, or a substitute for obtaining such advice specific to your business. Additional information and exceptions may apply. Applicable laws may vary by state or locality. No assurance is given that the information is comprehensive in its coverage or that it is suitable in dealing with a customer’s particular situation. Intuit Inc. does not have any responsibility for updating or revising any information presented herein. Accordingly, the information provided should not be relied upon as a substitute for independent research. Intuit Inc. does not warrant that the material contained herein will continue to be accurate, nor that it is completely free of errors when published. Readers should verify statements before relying on them.

https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program

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