Prepare for Paycheck Protection Program loan forgiveness

QuickBooks is working to make it easier to apply for PPP loan forgiveness. If you received a PPP loan, it’s important to understand loan forgiveness requirements set by the U.S. Department of the Treasury and the Small Business Administration (SBA). Learn what you can do now to prepare for PPP loan forgiveness, like tracking your spending on forgivable expenses.

QuickBooks support with the Paycheck Protection Program

The clear path to loan forgiveness begins with QuickBooks

If you received a PPP loan, visit the PPP Center to see your covered period, get a loan forgiveness estimate, and access your loan agreement, payroll, and non-payroll reports. If you’re curious about the PPP, simply register for updates.

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A simple view of PPP loan forgiveness

If you received a PPP loan, it’s time to start preparing for loan forgiveness. Here’s how it works.

A simple view of PPP loan forgiveness
A simple view of PPP loan forgiveness

Regulations and guidance on the PPP are evolving rapidly. Please refer to the SBA and U.S. Department of the Treasury to confirm current program rules and how they apply to your particular situation.

Apply for a Paycheck Protection Program loan

Understand loan forgiveness

Get guidance on the most important Paycheck Protection Program loan forgiveness topics.

Intuit loan forgiveness calculator

Estimate PPP loan forgiveness based on your business info. You’ll need to provide amounts or estimates for the following:

  • Average monthly payroll costs
  • Other monthly expenses (mortgage interest, rent, and utilities)
  • Loan forgiveness may be reduced if you’ve reduced employee headcount or wages.
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estimate ppp loan forgiveness
Loan forgiveness covered period

To maximize your forgiveness amount you’ll need to use your loan funds during your loan forgiveness covered period.

  • If you received a loan before June 5, 2020, you can choose between an 8-week or 24-week loan forgiveness covered period.
  • If you received your PPP loan after June 5, 2020, your loan forgiveness covered period is 24 weeks.
 

Your 24-week covered period generally begins on the date you received your PPP funds. If you received funds on more than one date, it starts on the first date. Your covered period must end no later than December 31, 2020.

You don’t have to use all your loan proceeds during the covered period, but only eligible payroll costs and certain operating expenses are eligible for forgiveness. If you use funds after the covered period, costs won’t be forgiven.

Alternative payroll covered periodIf you pay people more frequently (biweekly or more frequent payroll) you can choose an alternative payroll covered period that aligns with your payroll cycle. This alternative covered period begins on the first day of the first pay period after you receive your PPP funds.
  • For example, if you received your PPP funds on April 20, and the first day of your first pay period after receiving funds is April 26, the first day of the alternative payroll covered period is April 26.
If you choose to use this alternative period, it applies only to payroll costs and certain required reductions.
Understand coverage options
What’s considered a forgivable expense?

Your PPP loan may be forgiven, partially or in full, if you spend at least 60% on eligible payroll costs and no more than 40% on eligible non-payroll costs.

Stick to the 60/40 ruleTo help maximize your forgivable amount, you should spend at least 60% of your PPP funds on eligible payroll costs. These include:
  • Salary, wages, commissions, or similar compensation, as well as cash tips or equivalent
  • Employee benefits—payment for vacation, medical, family, parental, and sick leave
  • Allowance for employee separation or dismissal
  • Group healthcare benefits and insurance premiums
  • Payment of retirement benefits
  • Payment of state and local taxes assessed on compensation
 Up to 40% of the forgivable amount can be spent on:
  • Interest payments on business mortgage obligations for real or personal property incurred before February 15, 2020
  • Business rent or lease payments on lease agreements for real or personal property in force before February 15, 2020
  • Business utility payments for the distribution of electricity, gas, water, transportation, telephone, or internet access for which service agreements began before February 15, 2020
Always refer to the latest guidance from the SBA.
Explore eligible expenses
How to track expenses

To request PPP loan forgiveness, you need to prove that you’ve spent your loan on eligible payroll costs and other forgivable expenses. Start tracking your expenses in the PPP Center or document everything on your own.

Stay on track
Track PPP spending
How to prepare for loan forgiveness
1. Keep employee headcount

You should have the same average number of full-time equivalent employees on the payroll during your loan forgiveness covered period as you did between February 15, 2019 and June 30, 2019, or January 1, 2020 and February 29, 2020.

Seasonal applicants may choose between the previous time 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 either the date you submit your application for loan forgiveness or December 31, 2020, your loan forgiveness amount will not be reduced based on headcount reductions.

2. Maintain employee salaries and wages

PPP loans cover annual eligible payroll costs up to $100,000 per employee. If you reduce employee pay by 25% or more, your forgivable amount may be reduced. If you’ve reduced salaries and wages for employees, restore each worker’s normal salary and wages.

3. Spend your loan on eligible expenses

Keep an accurate record of employee payroll expenses, stay organized, and track your spending. To maximize your forgiveness amount, you must spend at least 60% of the forgivable amount on eligible payroll expenses and don’t exceed more than 40% on eligible non-payroll expenses.

4. Spend funds within the loan forgiveness covered period

You don’t have to spend your full PPP loan in the loan forgiveness covered period. However, amounts spent after won’t be forgivable. You’ll need to pay off your balance (at 1% interest) within 5 years if your loan was made on or after June 5, 2020. For loans made before June 5, 2020, the maturity is still 2 years but borrowers may be able to work with their lender to extend the maturity of the loan to 5 years. Payments won’t start for 6 months but interest will start accruing immediately.

What happens if my loan wasn’t fully forgiven?

The remaining balance needs to be repaid over a 5-year period, or a 2-year period, depending on when you received your loan.

If you submit a loan forgiveness application within 10 months after your covered period (24 weeks after you received your loan) or by December 31 (whichever is earlier), you won’t have to make any principal or interest payments before the date the SBA issues its decision on your loan forgiveness amount.

If you don’t submit a loan forgiveness application within the earlier of either (1) 10 months after your covered period (24 weeks after you received your loan) or (2) December 31, you must start paying principal and interest payments after that period. Your loan will accrue interest at 1% starting from the date your approved SBA lender for the PPP sent the loan. This interest will continue to build until the loan is paid off or otherwise forgiven.

Learn how payback works
loanfrorgivness repay

To apply for PPP loan forgiveness on your own, visit the SBA.

How to prepare for loan forgiveness applications

To apply for PPP loan forgiveness you’ll need to provide the following information:

  • Number of employees on the payroll
  • Employee pay rates
  • Payroll tax filings
  • Payroll costs paid in the loan forgiveness covered period
  • State income, payroll, and unemployment insurance filings
  • Canceled checks, payment receipts, transcripts of accounts, or other documents that verify payments on utilities, mortgage interest, and covered lease obligations, including documentation of these payments or agreements before February 15, 2020
  • Documentation of any advance received under the CARES Act EIDL program
  • Documentation verifying eligible non-payroll expenses incurred during the loan forgiveness covered period

If you’re a Schedule C filer, gather the following info:

  • Payroll tax filings
  • State income, payroll and unemployment insurance filings (if you have employees)
  • 2019 Form 1040 Schedule C that was provided to your approved SBA lender for the PPP at the time of your PPP loan application
  • Cancelled checks, payment receipts, transcripts of accounts, or other documents that verify payments on mortgage interest, rent or lease, and utility (if you claimed or are entitled to claim a deduction for such expenses on your 2019 Form 1040 Schedule C) for the loan forgiveness covered period after you received PPP funds
  • Documentation of any advance received under the CARES Act EIDL program
Note: Review the PPP loan forgiveness application or the EZ PPP loan forgiveness application to see what additional documents borrowers need to retain, and the amount of time the documents need to be retained. There are separate documentation requirements for each application.

Related articles and resources

Ask your QuickBooks Community

Get answers to your Paycheck Protection Program questions, find tips from experts, and learn more about how you can apply for loan forgiveness within QuickBooks Capital.

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Intuit Aid Assist—see if you’re eligible for small business relief programs

Note: Please refer to the SBA and Treasury to confirm current program rules and how they apply to your particular situation.

Frequently asked questions

Check out additional frequently asked questions to learn more about the Paycheck Protection Program.