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Intuit

PPP Payroll Costs for QuickBooks Online Forgiveness Application Report – What You Need to Know (And Review)

Our tool collects and presents for your review certain payroll costs identified on employee paychecks and pay stubs in your QuickBooks account bearing a check date that falls within a period that you specify.  Before you use the payroll data in this report as part of a PPP Loan Forgiveness Application, you must read and understand the important information below regarding (1) how we identify and calculate the payroll costs reflected on this report (2) guidelines for use of the report (including how it may be overinclusive and underinclusive of payroll costs eligible for PPP loan forgiveness), and (3) documentation required to be submitted with your PPP Loan Forgiveness Application.  In addition, please see here for helpful information about PPP loan forgiveness, including a discussion of which payroll costs are eligible for forgiveness.

Borrowers will be asked to certify that the payroll costs claimed for forgiveness in their PPP Loan Forgiveness Application are eligible for forgiveness under the applicable guidance.  Be advised that 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.

How we identified and calculated your payroll costs presented on this report

Step one: We use the time period established by the dates you select for the report

This report uses the start date and end date selected by you.  Please select the period or periods appropriate for your PPP Loan Forgiveness Application.

For purposes of forgiveness, each borrower has a Loan Forgiveness Covered Period (LFCP). Certain payroll costs that are paid during your LFCP or, if applicable, your Alternative Payroll Covered Period (APCP) (see below) or that are incurred during the last pay period in your LFCP (or, if applicable, APCP) and paid on or before the next regular payroll date are eligible for forgiveness. The PPP Loan Forgiveness Application provides that payroll costs are considered incurred on the day that 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.

The PPP Loan Forgiveness Application states that the LFCP relevant to the calculation of your loan forgiveness amount begins on the disbursement date of your loan.  The disbursement date is the date you received your PPP funds (or if you received them on more than one date, the first date you received PPP funds).  If you received your PPP loan proceeds from your lender on or after June 5, 2020, your LFCP is 24 weeks. If you received PPP loan proceeds before June 5, 2020, you can choose to use either an 8-week or 24-week LFCP.

Alternative Payroll Covered Period (APCP): Solely for the purpose of calculating payroll (and certain required reductions), if you are a borrower with a biweekly or more frequent payroll schedule, you may choose an APCP that aligns with your payroll cycle. The APCP begins on the first day of the first pay period following receipt of your PPP funds. If you choose to use this alternative period, it applies only to, and must be used for, payroll costs and certain required reductions in your PPP Loan Forgiveness Application.

Your LFCP or APCP, if applicable, must end no later than December 31, 2020.

Step two: We identify employee paychecks or pay stubs bearing a check date that falls within the period you select

We populate the table in your report (as described in the steps below) using payroll costs identified on employee paychecks and pay stubs in your QuickBooks account bearing a check date that falls within the selected period.

Note – Because we rely on employee paychecks and pay stubs bearing a check date that falls within the selected period as our starting point, the table and thus the report may include certain payroll costs not eligible for forgiveness and may exclude other payroll costs that are eligible for forgiveness.

Specifically, the table on this report may include certain payroll costs that were not (1) paid during your LFCP or APCP, as applicable, or (2) incurred during the last pay period of your LFCP or APCP, as applicable, and paid on or before the next regular payroll date.  Conversely the report may exclude certain payroll costs that were either (1) paid during your LFCP or APCP, as applicable, or (2) incurred during the last pay period of your LFCP or APCP, as applicable, and paid on or before the next regular payroll date.  See additional information below under Guidelines for Use.

Step three:  We calculate cash compensation payroll costs reflected on the identified paychecks or pay stubs and present those on the table in the report

For the table on your report, we calculate each employee’s cash compensation payroll (i.e., gross earnings) using cash compensation amounts identified on the employee paychecks or pay stubs bearing a check date that falls within the period you select.

Consistent with PPP requirements, cash compensation in this report includes:

  • Hourly and salary-based wages, overtime, tips, bonus, commission, per diem, cash-based clergy payments and other cash items
  • Paid leave (vacation, parental, family, medical, or sick leave)
  • Allowances for separation or dismissal pay

Note – This report excludes qualified sick and family leave wages and wage equivalents covered by titles 7001 through 7004 of the Families First Coronavirus Response Act to the extent we are able to identify them as such.  See additional information below under Guidelines for Use.

Step four:  We cap each employee’s cash compensation as displayed on the table on your report at $100,000, as prorated for the period you select

For example, if you choose an 8-week period, each employee’s cash compensation is capped at $15,385; if you choose a 24-week period, each employee’s cash compensation is capped at $46,154.

We apply these prorated caps consistent with PPP guidance relevant to non-owner employees. The PPP Loan Forgiveness Application and Instructions provide that, for each non-owner employee, the total amount of cash compensation eligible for forgiveness may not exceed an annual salary of $100,000 as prorated for the Borrower’s LFCP or APCP, if applicable.   If an 8-week LFCP applies, the application sets this amount at $15,385 which is equivalent to 8/52 X $100,000. If a 24-week LFCP applies, the application sets this amount at $46,154 which is equivalent to 24/52 X $100,000.

Note - This report does not distinguish between owner-employees and non-owner employees.  There are different rules and caps applicable to owner-employee compensation in the forgiveness context (for example, total owner compensation is capped at $15,385 over an 8-week period and $20,833 over a 24-week period).  As a result, this report may be overinclusive and/or underinclusive of owner compensation eligible for forgiveness.  See additional information below under Guidelines for Use.

Step five: We calculate non-cash compensation payroll costs reflected on the identified paychecks and pay stubs and present those on the table in the report

For the table on your report, we calculate each employee’s non-cash compensation payroll using amounts identified on the employee paychecks or pay stubs bearing a check date that falls within the period you select.

Consistent with PPP requirements, non-cash compensation in this report includes:

  • company contributions for retirement and employee health insurance
  • employer state and local payroll taxes assessed on employee compensation

Note - This report does not distinguish between owner-employees and non-owner employees.  There are different rules and caps applicable to owner-employee compensation in the forgiveness context.  As a result, this report may include owner non-cash compensation that is not eligible for forgiveness.  See additional information below under Guidelines for Use.

Guidelines for Interpreting and Using the Data in this Report

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 such advice specific to your business. The report may be both overinclusive and underinclusive of payroll costs eligible for forgiveness.

Borrowers should review this report, the methodology used to prepare it (including the assumptions and limitations), and the relevant SBA and Treasury guidance before relying on it and providing it to any lender as part of a PPP Loan Forgiveness Application.

Borrowers applying for forgiveness will need to certify, among other things, that the amount for which forgiveness is requested was used to pay costs that are eligible for forgiveness, that the payroll costs for which forgiveness is sought was used to retain employees, and that they have verified the payments for the eligible costs for which forgiveness is requested.  In particular, Borrowers will need to verify – and provide documentation supporting –  payment within the forgiveness eligibility time frame (i.e. within the LFCP or APCP, as applicable or, for costs incurred during the last pay period of the LFCP or APCP, as applicable, by the next regular payroll date).

Because we use paychecks and pay stubs bearing a check date that falls within the period you designate as your LFCP or APCP, if applicable, for the table in your report, the period covered by those paychecks and pay stubs may not fully align with your LFCP or APCP, if applicable.  It may include full or partial pay periods outside your LFCP or ACPC, if applicable, and may exclude full or partial pay periods inside your LFCP or ACPC, if applicable.

The PPP Loan Forgiveness Application provides that payroll costs are considered incurred on the day that 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. Payroll costs that were both paid and incurred in the period you select as your LFCP or APCP, if applicable, may only be counted once for purposes of your forgiveness application.

To the extent you use ACH transactions for employee cash compensation, payment of those costs generally coincides with the check date.  For all other payroll costs displayed on the table (i.e., cash compensation paid by check, non-cash compensation amounts), the costs identified are costs incurred in the pay periods covered by the paychecks and pay stubs.

As a result, this table may include certain payroll costs that are not eligible for forgiveness because they were not (1) paid during your LFCP or APCP, as applicable, or (2) incurred during the last pay period of your LFCP or APCP and paid on or before the next regular payroll date.  Conversely the table may exclude certain payroll costs that were either (1) paid during your LFCP or APCP, as applicable, or (2) incurred during the last pay period of your LFCP or APCP and paid on or before the next regular payroll date.

In connection with applying for forgiveness, you should review all payroll costs reflected in this report and determine whether they were paid during your LFCP or APCP, as applicable, or incurred during the last pay period of your LFCP or APCP and paid on or before the next regular payroll date.  Relatedly, you may be eligible and wish to seek forgiveness of payroll costs not included on this report, for example payroll costs incurred in the last pay period during the LFCP/APCP and paid by the next regular payroll date for which no employee paycheck or pay stub contained a check date falling within the LFCP/APCP.

This report does not distinguish between non-owner employees and owner-employees (inclusive of self-employed individuals and general partners).  As a result, it does not apply the compensation caps and rules applicable to owner-employee compensation in the forgiveness context, which differ from the caps applicable to non-owner employees. Specifically the PPP Loan Forgiveness Application and Instructions provide that forgivable loan amounts paid to owner-employees, self-employed individuals, or general partners are limited to (i) for borrowers with an 8-week LFCP, the 8-week equivalent of their applicable total compensation in 2019, capped at $15,385, or (ii) for borrowers with a 24-week LFCP, the 2.5 month equivalent of their applicable total compensation in 2019, capped at $20,833. In addition, the PPP guidance specifies what various types of owner-employees may and may not include in their total compensation eligible for forgiveness.  As a result, this report may be overinclusive and/or underinclusive of owner compensation eligible for forgiveness.

This report also does not exclude qualified sick and family leave wages or wage equivalents covered by sections 7001 through 7004 of the Families First Coronavirus Response Act (“FFCRA”) unless you have set up their Intuit Payroll account to track these expenses.  However, qualified sick and family leave wages for which a credit is allowed by these sections must be excluded by you when determining the eligible forgivable payroll costs.  Borrowers must confirm that their forgiveness application excludes leave covered by the FFRCA.

This report does not account for reductions in forgiveness you may have due to reductions in headcount, salaries, or wages, or needed to meet the requirement that 60% of your forgiveness amount is attributable to payroll costs eligible for forgiveness.  It also does not account for non-payroll costs that may be eligible for forgiveness.

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

Documentation Requirements

Please review the PPP Loan Forgiveness Application Instructions published by the SBA to review the list of documents that each borrower must submit and/or retain in connection with a PPP Loan Forgiveness Application. Note that if you opt to use an EZ PPP Loan Application, certain documentation requirements may differ.  Documentation requirements for EZ PPP Loan Applications is available here.

With regard to payroll costs for which forgiveness is sought, borrowers must provide documentation verifying payment of eligible cash compensation and non-cash benefits.

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