Title: Navigating PPP Loan Forgiveness: Frequently Asked Questions
Headings: Navigating PPP Loan Forgiveness: Frequently Asked Questions
Navigating PPP Loan Forgiveness: Frequently Asked Questions
On April 24, Herbein + Company, Inc. (Herbein) hosted a Navigating PPP Loan Forgiveness webinar.
1. Is the requirement of no less than 75% be spent on payroll costs and no more than 25% spent on nonpayroll costs calculated on loan proceeds or loan forgiveness?
2. Does the PPP funding include non-profits?
3. The debt forgiveness is tax-free to borrowers, but can they deduct the forgiven expenses even though the government effectively paid them?
4. What comprises a “utility cost”?
5. Are we able to use workers compensation, life insurance, and disability insurance premiums for loan forgiveness?
6. Does rent include autos, copiers, software, etc.?
7. Why do I need to open or use a separate bank account to keep track of the PPP funds? Can I just use a separate GL account rather open a new checking account?
8. Can annual 2019 retirement plan contributions that have not yet been funded be paid with PPP loan proceeds and be forgiven?
9. If we placed an employee on furlough and ask them to come back to work, but they instead hand in their resignation, will that impact our loan forgiveness?
10. Can I increase hourly pay rates or pay bonuses during the 8-week covered period be able to meet the requirement to spend 75% of the loan forgiveness amount on payroll costs?
11. Can I prepay payroll and non-payroll costs, and have it count towards loan forgiveness?
12. What constitutes authorized payroll costs for forgiveness purposes for a self-employed (Schedule C) taxpayer who received a PPP loan?
13. What period do I need to use the PPP loan proceeds on payroll and non-payroll costs?
14. Our employees have already been laid off and are collecting unemployment benefits. Can I reach out to them and ask them to come back to work and pay them with PPP loan proceeds?
15. Must I use all the PPP loan proceeds received?
16. With regards to payroll periods, if my current payroll period does not line up with the 8-week covered period, do I need to change my payroll period?
17. If an hourly employee is working reduced hours, does this impact both the FTE and the wage reduction limitation?
18. Does the maximum compensation amount of $100,000 pertain to the amount paid during the 8-week covered period or is it based on an annualized amount? And, does the $100,000 limitation measured on straight salary or does it include bonuses?
19. Does an employee have to be working or can we pay them with PPP funds to stay at home?
20. Is the term of the PPP loans over 24 or 30 months?

Content: 2. Does the PPP funding include non-profits? In addition to small businesses, PPP loans are also available for qualifying tax-exempt nonprofit organizations described in section 501 (c) (3) of the Internal Revenue Code (IRC), tax-exempt veterans organization described in section 501 (c) (19) of the IRC, and tribal business concerns described in section 31 (b) (2) (C) of the Small Business Act. 3. The debt forgiveness is tax-free to borrowers, but can they deduct the forgiven expenses even though the government effectively paid them? This issue has engendered a great deal of debate. Some believe that the forgivable expenses, otherwise deductible, are likely nondeductible under IRC §265, a provision that disallows expenses relating to tax-exempt income. Others feel that if no deduction is allowed, then the borrower receives no tax benefit – it has no income from the forgiveness and no deduction for the expenses. This seems contrary to the intent of the statute. The AICPA has reached out to the IRS for clarification of this matter.