loan forgiveness payroll

How To Calculate Gross Income For The Ppp s that were already processed are not eligible for an increase in their amount. After the forgiveness application is accepted by the SBA Platform, the lender will be notified by the SBA Platform. The lender has 60 days from the date of notice to review the forgiveness application and supporting documentation and issue a forgiveness decision to SBA through the SBA Platform.

  • As a note of caution, this position may change through subsequent legislation.
  • Note that this change applies only to PPP loans approved after March 4, 2021; those whose loans had already been approved cannot increase their loan amounts based on the new calculation.
  • Static or fixed-date conformity states conform to the IRC on a given date, or conform to specifically enumerated provisions.
  • AICPA leaders will discuss the SBA guidance, new forms and FAQs during an online Town Hall that will start at 3 p.m.
  • To make the PPP more widely available to self-employed small business owners, the loan calculation amount is now based on gross income.

“The whole idea of the PPP, at least originally, was not so much to put money in a business’s pocket to maintain the business, but to maintain employees,”said Robert Durkin, president of the Scranton Chamber of Commerce. The easiest way to prove your expenses is to have bookkeeping done during the period you’re spending the loan funds. This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post.

With Employees

If the number is 0.25 or greater, then your business can demonstrate a 25% decrease in annual revenue. Before, these loans were likely not worth the effort for you—however, now you have the potential to earn some fully forgivable, tax-free financing. Your 2019 or 2020 gross profit is listed either on an annual income statement, or on line 7 of your Schedule C if you have a completed tax return. If you’re self-employed and have completed your 2019 or 2020 tax return, your Schedule C will show your net profit.

  • The regulations were changed to enable small, underserved businesses easier access to PPP funds to keep their businesses operating during the economic recovery from COVID-19.
  • While highly nuanced, taxpayers should be aware that states may need to provide additional guidance clarifying that PPP loans are also forgiven for state tax purposes.
  • Divide your total payroll costs by three to obtain the average monthly payroll cost you can report.
  • For self-employed borrowers with no employees that file IRS Form 1040, Schedule C, that used gross income to calculate the loan amount, proprietor expenses equal gross income.

You may be better suited to applying for the EIDL program instead, or registering for Unemployment Benefits through your state. While your rent and utility payments can be covered by this loan and help qualify you for loan forgiveness, they are not a part of the initial calculation. As an independent contractor, your 2019 or 2020 gross income is recorded on Line 7 of your Schedule C. When applying, both your Schedule C and 1099-MISC forms for the year will need to be provided. Also, along with the current ruling, some other changes have emerged, not exactly center-stage, but still important. For example, PPP eligibility now extends to individuals who have defaulted or missed payments on federal student loans.

What if I do not meet the 25% gross receipts test?

If you have not taken a First Draw or Second Draw PPP loan and you use Schedule C to file your taxes, you can proceed with your tax calculations and see how you will fare. To give you an idea of where you stand, the following information covers the steps you need to follow if you work on your own and do not currently pay employees or record accounting information for payroll. In addition, as set forth in the CAA 2021, borrowers can use loan proceeds on certain covered supplier costs, worker protection expenditures, property damage costs, and operations expenditures. In addition, as set forth in the CAA 2021, borrowers can also use loan proceeds on certain covered supplier costs, worker protection expenditures, property damage costs, and operations expenditures. Schedule C filers are not required to use gross income and can still use net income to calculate PPP loan amounts. Along with its new guidance, the SBA also released new PPP loan application forms, including an updated First and Second Draw borrower application form for Schedule C filers. Next, you must adjust your PPP forgivable amount by any salary/hourly wage and FTE reductions you had during the covered period.

Also, as always, banks will have to implement these changes quickly, and many were already closing deadlines early. The American Institute of CPAs has asked Congress for at least 60 more days for loans, but that has not been addressed at this point. ADP has reports to help clients determine their Paycheck Protection Program covered payroll costs.

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