As we try to keep everyone up to date, please realize that much of the information we try to share in a timely manner is subject to change by the powers-that-be at any time.  It seems that the HOUSE and SENATE are both working on different bills to ease the forgiveness rules of the Payroll Protection Program (PPP).


One bill doubles the forgiveness time to 16 weeks, the other bill goes to 24 weeks and removes the 25% limitation for non-payroll expenses. is probably the most complicated update to date.  It contains a lot of information. Some of it may remain, some of it may change as SBA / Treasury releases more information.


I have wanted to post a follow up for some time now, but I was waiting on further clarification, which has not come.  As complicated as this appears, if you have engaged us to handle this program for you, we will work with you every step of the way.  As a CPA who likes to have established guidelines in place,  this is extremely frustrating when trying to advise clients on the best way to move forward.  I think the best advice that I can give at this time is to spend your PPP funds as prudently as possible, just as you would with any other asset of the business.  Yes, the ultimate goal is to maximize the forgiveness of the loan, but we do not want to spend the money foolishly, and then, because of a midstream rule change, we find ourselves in a rough patch and short of capital.  I will share the following Politico news article for you to read so that you can see for yourself.


The Payroll Protection Program started with a simple idea. Hopefully, the final guidance on the forgiveness will be as simple, however, that guidance has not been published yet. The original program allowed businesses to borrow 10 weeks of gross wages plus state unemployment cost, related employee health insurance, and retirement contributions for those 10 weeks of wages. The goal was simple, give employers the money to keep their trained workforce on payroll so when the economy opened the workforce would still be in place.


The concept of forgiveness can be just as simple. The law allows your business to borrow 10 weeks of payroll and in calculating loan forgiveness you only get to count 8 weeks of wages paid after you get the loan. The other 2 weeks of payroll you borrowed can be used to pay rent, lease, utilities, and interest on agreements in existence before you applied for the loan.  As you will see, it did not end up being that simple.  Many complicated calculations will be needed to determine your forgiveness.


We believe almost every small business will have to repay some of their PPP loans, but the business owner still gets the benefit of no labor cost for the part of the loan that is forgiven which allows more funds to the business owner to support the troubled areas of their business.




The law states you use costs “incurred and paid” during the 8-week period starting on the loan funding date. Below are the basic expenses eligible for both the use of loan proceeds and forgiveness:

  1. Gross wages paid for paychecks issued (wages over $100,000 per annum excluded.)
  2. State unemployment and other state and local taxes assessed on the employer-based on those wages.
  3. Employer costs related to employee health insurance related to those 8 weeks of payroll.
  4. Employer SEP/SIMPLE/401k match/Profit sharing/pension contribution related to those 8 weeks of payroll including partner/member/owner retirement.
  5. Partners in a partnership and members of an LLC get to use their self-employment earnings, prorated for 8 weeks, from Form 1065 Sch K-1, box 14A of their 2019 partnership tax return as the owner wages since the owner does not draw wages on a W-2.
  6. Self-employed business owners get to use Form 1040 Sch C, line 31 or Sch F,  line 34 of their 2019 individual tax return, prorated for 8 weeks, as their wages.
  7. Business lease payments paid on leases in effect 2-15-20.
  8. Business utility bills for utilities in effect 2-15-20 including electricity, gas, water, telephone, internet, and maybe for business vehicle gas.
  9. Interest on business loans in effect 2-15-20.

The sum of items 7, 8, and 9 above cannot exceed 25% of the total PPP costs forgiven.



Remember the purpose of the law is to help a business owner keep employees on the payroll. Therefore, the forgiveness of the loan is reduced if the employer pays less in wages or has fewer employees during the 8-week period of loan spending compared to an earlier period. As a result, there are two numbers that are important when it comes to payroll (wage cost and a number of full-time equivalent employees).  No direction has been given on the amount forgiveness will be reduced in these criteria are not met.

In addition to measuring gross wages, you must measure full-time equivalent employees (FTE) during the 8-week period of loan spending as compared to your choice of one of two lookback periods.

If you would like more information, the U.S. Treasury’s website on the Payroll Protection Program FAQ can be found here.

Stay Safe!

John M. Estess, CPA