Payroll Protection Program and Forgiveness Calculation Update

Author: Lynn Fountain

The U.S. Small Business Administration (SBA), in consultation with Treasury, in July 2020 released a revised loan forgiveness application for the Paycheck Protection Program (PPP). The SBA also unveiled a new EZ application for forgiveness of PPP loans. The applications reflect changes to the PPP made by the Paycheck Protection Flexibility Act of 2020, which became law June 5, 2020.

The releases came only hours after the SBA issued a new interim final rule providing guidance on how to calculate employee and owner compensation for loan forgiveness in the new 24-week covered period created by the Paycheck Protection Flexibility Act. Congress passed the Paycheck Protection Flexibility Act to make it easier for small businesses and other PPP borrowers to qualify for full loan forgiveness. Among the changes in the act are:
• An expansion of the “covered period” for loan forgiveness to 24 weeks from eight weeks,
• A reduction of the proportion of proceeds that must be spent on payroll costs to 60% from 75%,
• The establishment of a safe harbor for businesses that have been unable to return to the level of business activity they had before the COVID-19 pandemic due to compliance with health and safety guidelines for slowing the spread of the virus.

PPP funds are available to small businesses that were in operation on Feb. 15 with 500 or fewer employees, including not-for-profits, veterans’ organizations, Tribal concerns, self-employed individuals, sole proprietorships, and independent contractors. Businesses with more than 500 employees in certain industries also can apply for loans.

Congress approved $349 billion in PPP funding. After that money was quickly exhausted, Congress authorized another $310 billion, bringing the program total to $659 billion.

This course is designed to walk through and discuss the many concepts involved in the SBA PPP Loan Forgiveness application. We will also cover areas of the revised PPP Loan Forgiveness Application and instructions include a number of notable items.

Publication Date: February 2021

Designed For
Accountants and Finance professionals, Internal auditors/Professionals considering the role of internal audit, Legal and Compliance professionals.

Topics Covered

• Background
• PPP First and Second Draw Loans
• What Form Do I Use?
• Basics
• Line by Line Forgiveness Form
• FTE Reduction Safe Harbors
• Forgiveness Amount Calculation
• Process Summary
• Examples
• Documents Each Borrower Must Submit with PPP Loan Forgiveness Application

Learning Objectives

• Describe the background of the PPP Program
• Recognize the first and second draw PPP Loans
• Recognize which forgiveness application to use
• Identify the basics involved in forgiveness calculation
• Describe the SBA PPP Forgiveness form and instructions and how to utilize them
• Recognize how to estimate your PPP loan forgiveness
• Identify what incorporates eligible payroll costs
• Describe the requirements for documentation
• Describe unique elements of the PPP forgiveness process
• Recognize components of covered nonpayroll costs

Level
Update

Instructional Method
Self-Study

NASBA Field of Study
Accounting (1 hour), Auditing (1 hour)

Program Prerequisites
Basic understanding of accounting and auditing.

Advance Preparation
None