Summary of New SBA Forgiveness FAQs

Key Takeaways for Businesses Filing for PPP Loan Forgiveness

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In response to questions and requests for clarification surrounding Paycheck Payment Program (PPP) Loan Forgiveness, the Small Business Administration (SBA) released ten pages of Frequently Asked Questions (FAQs) on August 4, 2020. Below, K·Coe advisors have provided a summary of key takeaways for businesses relating to FAQs around Payroll Costs and Non-Payroll Costs for filing for PPP loan forgiveness.

General FAQS: Using the EZ Form and Payment Start Dates

  • Using the EZ Form: Use the EZ forgiveness form if (1) you’re self‐employed or an independent contractor, (2) had no employees at the time of the loan application, and (3) did not include employee salaries when you calculated your PPP loan amount.
  • Determining your Payment Start Date: The FAQs state that as long as you submit your forgiveness application to the bank within 10 months of the end of your covered period, your payments will not begin – even if it takes the bank and SBA longer to process your application. However, for many loans originated before June 5, payments are set to begin after six months. There is significant confusion, and lenders are working to get clarity from SBA on what changes need to be made to their original notes.

Payroll Cost: GENERAL

  • Include payroll costs:
    • if they were incurred during and paid after the end of your Covered Period – payment of the costs must be made on or before the next regular payroll date.
    • that are incurred before and paid during your covered period.
  • Unless using the Alternate Payroll Covered Period, calculate the accrual of partial payroll period costs. This will maximize your eligible expenses.
  • When determining payroll costs, use each employee’s gross pay before any deductions.
  • Compensation includes tips, commissions, bonuses, and hazard pay, in addition to employees’ regular salary or hourly pay.
  • Health costs include only the employer portion.
  • Health costs are considered incurred during the Covered Period as long as they are paid to the plan administrator by the next due date.
  • Employers cannot accelerate retirement plan contributions into the Covered Period.


  • For all owners, compensation is limited to $15,385 (for eight-week Covered Period, or $20,833 for 24‐week period), across all businesses the owner participates in. The owner may allocate their cap among their businesses at their discretion.
  • For LLC members, follow the instructions for the federal tax status of the LLC below.
  • For C Corporation Shareholders, payroll costs are limited to:
    • For compensation, the lesser of:
      • Actual 2020 compensation,
      • $20,833 (for 24 weeks; $15,385 for 8 week Covered Period); or
      • 5 months’ worth of 2019 cash compensation (multiply total 2019 compensation by 2.5, then divide by 12).
    • Health insurance costs paid by the corporation (i.e, health insurance premiums); and
    • For retirement contributions, the lesser of:
      • Actual 2020 retirement contributions made in the Covered Period, or
      • 2.5 months’ worth of 2019 retirement contributions (multiply total 2019 contributions by 2.5, then divide by 12).
  • For self‐employed individuals reporting on Schedule C or Schedule F, payroll costs are limited to:
    • For compensation, the lesser of:
      • $15,385 (or $20,833, if using 24‐week Covered Period), or
      • 2.5 months’ worth of 2019 net profits.
    • Payroll costs do not include the owner’s health insurance, retirement, or state tax costs
  • For general partners of partnerships: Payroll costs are limited to:
    • For compensation, the lesser of:
      • $15,385 (or $20,833, if using 24‐week Covered Period), or
      • 9235 times 2.5 months’ worth of 2019 net earnings from self‐employment (K‐1 box 14a), less Section 179 deductions, unreimbursed partner expenses, and oil and gas depletion.

Non‐Payroll Costs

  • Include costs that were incurred prior to the Covered Period but paid during the Covered Period.
  • Include costs that were incurred during the Covered Period and paid after the Covered Period, if paid on or before the next regular payment due date.
  • The Alternate Payroll Covered Period does not apply to non‐payroll costs.
  • Interest on unsecured debt is not eligible for forgiveness.
  • Interest on recently renewed leases or recently‐refinanced mortgages count if the underlying obligation was in existence on or before February 15.
  • Transportation expenses means only the “transportation utility fees” assessed by state and local governments. It does not include freight contracts, company vehicle fuel, etc.
  • Both electricity supply and distribution charges are covered utility costs.
  • Do not include in your FTE reduction calculation: employees who were laid‐off and offered to be rehired, if you were unable to hire a similarly qualified individual before December 31, 2020.
  • Seasonal employers who used the 12‐week period to calculate their maximum loan amount must also use that same 12‐week period when calculating forgiveness reductions.
  • FTE reduction exceptions also include employees making over $100,000 in 2019.
  • For salary and wage reductions, only the amount of wages reduced in excess of 25% of pre‐COVID pay is reported as a wage reduction.
  • Compensation reductions only include salaries and wages, not commissions, bonuses, tips, etc.

Timing for Filing for PPP Forgiveness Applications

At this time, the new information provided by the SBA does not change any recommendations regarding timing of filing forgiveness applications.  K·Coe recommends holding off until after the close of your fiscal year, due to the interplay between the current tax treatment of loan forgiveness and PPP expense deductions.


For more information regarding planning opportunities relating to current tax issues and filing for PPP loan forgiveness, view K·Coe’s webinar on ‘PPP triage’ here: 

View the SBA’s full release of FAQ’s:–Loan-Forgiveness-FAQs.pdf 

Contact a K·Coe advisor with additional questions regarding filing for PPP Loan Forgiveness and applicability.



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