Learn how we calculate your average monthly payroll costs when you run a report in our payroll products.
When you apply for a Paycheck Protection Program (PPP) loan, you need to provide your average monthly payroll costs. If you use one of our payroll products, you can run a report to help you determine your average monthly payroll costs. Here we'll show you how we do the calculations in the report. This can help you make sure your PPP loan application only includes eligible payroll costs.
|Important: We created this report from paychecks processed within our payroll products. The payroll costs included in our calculations may differ in some ways from the payroll costs capable of supporting a PPP loan under SBA and Treasury guidance. You must verify that the average monthly payroll costs included in your PPP application comply with that guidance.
Regulations and guidance from the SBA and the U.S. Department of Treasury on the PPP are evolving rapidly. Please refer to the latest guidance from SBA and Treasury to confirm current program rules and how they apply to your particular situation.
How to run the report
Go to Compliance from within QuickBooks Online Payroll, or Reports in Intuit Online Payroll, to create and download an Average Monthly Payroll Cost Report for the selected lookback period. Information about how we calculate average monthly payroll costs on the report is presented below. Please consult SBA and Treasury guidance to determine which lookback period or periods are appropriate for your business.
How the payroll costs we calculate may differ from the payroll costs that can support a PPP loan
Our calculations may include payroll costs not capable of supporting a PPP loan. Here are some examples:
- Cash compensation payments to individuals whose principal place of residence is outside the United States (and related state and local payroll taxes and healthcare and retirement benefits)
- Qualified sick and family leave wages for which a credit is allowed under the Families First Coronavirus Response Act, to the extent you did not designate them for this credit in your QuickBooks Online Payroll or Intuit Online Payroll product
- Some payroll costs for Schedule C filers, Schedule F filers, or partners. While their net income or net earnings (as applicable) may support a PPP loan, they are subject to different eligibility criteria and caps.
You should also remove any costs reflected in the calculations if they were not paid.
Our calculations may exclude certain payroll costs that are eligible to support a PPP loan, such as payroll costs in the lookback period that were not processed by our payroll products.
Review the steps below for more details on how our calculations may differ from the payroll costs capable of supporting a PPP loan under SBA and Treasury guidance.
How we calculate your average monthly payroll costs
First, we calculate your total payroll costs using paycheck data dated in the lookback period you select:
Total payroll costs = adjusted earnings + employer taxes + company contributions
Then, we determine your average monthly payroll costs over the same lookback period:
Average monthly payroll costs = (total payroll costs from paycheck data in lookback period / days in lookback period) ✕ average number of days in a month
Here’s a more detailed breakdown of how we do these calculations.
Step 1: We calculate the gross earnings over the lookback period
Note: Please consult SBA and Treasury guidance to determine which lookback period or periods are appropriate for your business.
Using paycheck data dated in the lookback period you select, we determine gross earnings in that lookback period. Gross earnings in this report include (but are not limited to):
- Pre-tax compensation (hourly and salary-based wages, overtime, tips, bonuses, commissions, per diems, cash-based clergy payments, and other earnings items)
- Earnings for vacation, parental, family, medical, or sick leave. Note: This report excludes qualified sick and family leave wages covered by sections 7001 and 7003 of the Families First Coronavirus Response Act to the extent you have designated them as such in your account but will include other such wages to the extent you have not designated them.
We include paycheck data for individuals with a U.S. address, so our calculations may include amounts associated with individuals whose principal place of residence may be outside the U.S. Our calculations may also include amounts associated with owners, including Schedule C or F filers and partners.
You should confirm whether exclusions (or further exclusions) apply and, if necessary, manually decrease the total and average monthly payroll costs we calculated to reflect the excluded wages.
Step 2: We calculate adjusted earnings over the lookback period
Once we calculate the gross earnings, we apply the cap on gross earnings applicable to employees.
When calculating your average monthly payroll costs for the Paycheck Protection Program, we exclude any annualized earnings in excess of $100,000 per individual. This applies to gross earnings only.
To the extent compensation to owners (those receiving net income or net earnings from self-employment, such as Schedule C or Schedule F filers or partners) is included on this report, you may need to cap amounts related to their earnings included in your loan application at a lower amount (such as their 2019 or 2020 net income or earnings as applicable). Please review the Second Draw Maximum Loan Amount and Documentation FAQs for more information on the requirements applicable to your business type, including the applicable caps.
Step 3: We calculate other payroll costs over the lookback period
Using paycheck data dated in the lookback period, we determine:
- Company contributions to retirement plans and group healthcare coverage (including medical, vision, and dental insurance contributions)
- Company-paid state and local payroll taxes
This report does not include company contributions to employee life and disability insurance, which are also costs that can support a PPP loan. To the extent this report includes Schedule C or F owners or partners, you may need to exclude other payroll costs related to them from your loan application. As noted above, please review the Second Draw Maximum Loan Amount and Documentation FAQs for more information on the requirements applicable to your business type.
Step 4: We calculate average monthly payroll costs for the lookback period
- We sum the adjusted earnings, taxes, and contributions for all individuals on the report to derive total payroll costs for the lookback period.
- We divide the total costs by the number of days in the lookback period (for example,365 days in 2019).
- We multiply by the average number of days in a month (30.41667).
We use days rather than months for this calculation.
You are responsible for determining your average monthly payroll costs capable of supporting a PPP loan. The final loan amount will be determined by your lender following rules set by Small Business Administration (SBA).
As noted above, regulations and guidance from the SBA and the U.S. Department of Treasury on the PPP are evolving rapidly. As such, the information contained herein 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 in this article is made available to businesses located in the United States of America and is not available in other locations. Given the large demand for additional authorized Paycheck Protection Program funds, not every qualified Paycheck Protection Program applicant will receive a loan.
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.