{"id":25611,"date":"2020-03-28T02:05:21","date_gmt":"2020-03-28T02:05:21","guid":{"rendered":"https:\/\/wcginc.com\/?p=25611"},"modified":"2026-01-26T16:36:47","modified_gmt":"2026-01-26T16:36:47","slug":"paycheck-protection-program","status":"publish","type":"post","link":"https:\/\/wcginc.com\/blog\/paycheck-protection-program\/","title":{"rendered":"Paycheck Protection Program"},"content":{"rendered":"<div class=\"wpb-content-wrapper\"><p>[vc_row][vc_column]\t\t\t<div class=\"info-box-wrapper\">\n\t\t\t\t<div id=\"wd-68b57d6661306\" class=\" wd-rs-68b57d6661306 wd-info-box wd-wpb text-left box-icon-align-top box-style- color-scheme- wd-bg-none border-btm-title \">\n\t\t\t\t\t\t\t\t\t\t<div class=\"info-box-content\">\n\t\t\t\t\t\t\t\t\t\t\t\t<div class=\"info-box-inner reset-last-child\"><\/p>\n<div class=\"overview\">\n<h2><span class=\"ez-toc-section\" id=\"Key_Takeaways\"><\/span>Key Takeaways<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ul>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">The Paycheck Protection Program (PPP) is a $350 billion SBA loan program created under the CARES Act to help small businesses keep employees and cover key expenses during COVID-19.<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">Businesses with fewer than 500 employees, sole proprietors, independent contractors, self-employed individuals, and certain nonprofits are eligible.<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">Loans can cover payroll, mortgage interest, rent, and utilities from Feb 15 to June 30, 2020, up to 2.5x average monthly payroll (max $10 million).<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">No collateral or personal guarantees are required, interest is low (0.5\u20134%), and there\u2019s no prepayment penalty.<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">Loan forgiveness is available for funds used for payroll and other eligible expenses over an eight-week period.<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">Payroll costs for forgiveness include gross pay, benefits, and capped at $100,000 per employee; self-employment income counts for individuals but not K-1 S Corp distributions.<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">Forgiveness can be reduced for employee or wage reductions, but re-hiring employees can restore forgiveness amounts.<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">Contractors are generally not included in payroll costs for the employer, but may qualify for their own PPP loans.<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">Payroll timing, semi-monthly pay, and rent\/utility schedules can affect forgiveness calculations.<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">WCG offers guidance on eligibility, payroll calculations, and the forgiveness process, but clients must execute the loan application themselves.<\/span><\/li>\n<\/ul>\n<\/div>\n<p>\n<\/div>\n\n\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\n\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t\t\t\t<div class=\"info-box-wrapper\">\n\t\t\t\t<div id=\"wd-685dfc8473d38\" class=\" wd-rs-685dfc8473d38 wd-info-box wd-wpb text-left box-icon-align-top box-style- color-scheme- wd-bg-none border-btm-title img-right \">\n\t\t\t\t\t\t\t\t\t\t<div class=\"info-box-content\">\n\t\t\t\t\t\t\t\t\t\t\t\t<div class=\"info-box-inner reset-last-child\"><p><img decoding=\"async\" class=\"alignnone size-medium wp-image-23697\" src=\"https:\/\/wcginc.com\/wp-content\/uploads\/rave-300x183.jpg\" alt=\"\" width=\"300\" height=\"183\" srcset=\"https:\/\/wcginc.com\/wp-content\/uploads\/rave-300x183.jpg 300w, https:\/\/wcginc.com\/wp-content\/uploads\/rave.jpg 328w\" sizes=\"(max-width: 300px) 100vw, 300px\" \/><strong>Update<\/strong>\u00a0April 2, 2020 at 5:23PM (Treasury just released its\u00a0<a href=\"https:\/\/wcginc.com\/wp-content\/documents\/sba-disaster-loan\/PPP--IFRN%20FINAL.pdf\" target=\"_blank\" rel=\"noopener\">final final guidelines<\/a>)\u2026 no 1099s issued as payroll costs, and gross pay is in.<\/p>\n<p><strong>Update<\/strong>\u00a0April 3, 2020 at 10:51AM suffering from mojitovirus (added quick thoughts, see below).<\/p>\n<p>The CARES Act was just signed into law on Friday, March 27 and it included a crazy SBA loan called the Paycheck Protection Program (PPP). We wrote about this in another blog post titled COVID-19 Tax Stimulus but we wanted to take the SBA PPP loan and expand considerably on it. WCG has applied for this loan ourselves since our ability to predict our future is gone like most small businesses. We are a super healthy firm, but we are also very cautious and methodical with our operations.<\/p>\n<p>As such, we will be able to do two things: first, help you complete the necessary forms and schedules for SBA\u2019s Paycheck Protection Program, and second, give you our first-hand account of the process.<\/p>\n<p>We encourage you to\u00a0<strong>come back to this post often<\/strong>\u00a0as we receive further guidance. Here we go-<\/p>\n<\/div>\n\n\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\n\t\t\t\t\t<style><\/style>\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t\t\t\t<div class=\"info-box-wrapper\">\n\t\t\t\t<div id=\"wd-685dfd0b75187\" class=\" wd-rs-685dfd0b75187 wd-info-box wd-wpb text-left box-icon-align-top box-style- color-scheme- wd-bg-none border-btm-title \">\n\t\t\t\t\t\t\t\t\t\t<div class=\"info-box-content\">\n\t\t\t\t\t\t<h2 class=\"info-box-title title wd-font-weight-800 box-title-style-default font-primary wd-fontsize-m\"><span class=\"ez-toc-section\" id=\"Quick_Thoughts_on_PPP\"><\/span>Quick Thoughts on PPP<span class=\"ez-toc-section-end\"><\/span><\/h2>\t\t\t\t\t\t<div class=\"info-box-inner reset-last-child\"><p>This thing is a mess! The rules have been changing throughout the week. Here are some quick thoughts-<\/p>\n<p>The SBA funded $28 billion in loans in 2019. They are now expected to fund $349 billion in a day\u2026 a week\u2026 a month. Mission impossible.<\/p>\n<p>Banks are not thrilled to be doing this. They must use their own capital and get paid 1%. Yuck. They won\u2019t get a return of capital until the forgiveness component is completed. So they have a ton of risk. Banks are only backstopped 75%, and even that is flimsy. If a box isn\u2019t checked correctly\u2026 if the loan application was processed incorrectly\u2026 the SBA says \u201ctoo bad so sad, no backstop for you!\u201d So, low rates of return, reliance on forgiveness for return of capital and a 75% backstop. Not good.<\/p>\n<p>Bank of America is the first big bank to go through this. Marketing ploy? Did Treasury ask them to test the system, and did BofA say Sure, we\u2019ll lose money but we\u2019ll gain some marketing exposure?<\/p>\n<p>Big banks operate on way tighter capital margins than local banks which is another reason they are not thrilled. For example, WCG has a relationship with Wells Fargo and Chase (and our amazing First National Bank of Monument). Both big banks have a silly online questionnaire which ends in a \u201cwe\u2019ll get back to you in a few days.\u201d Seems cavalier if the pool of money is being drained like Caddyshack.\u00a0<strong>Lesson here:\u00a0<\/strong>bank with a community bank and build those relationships for moments like these!<\/p>\n<p>So, let\u2019s break this down. The CARES Act vis-a-vis the SBA is telling banks to lend money to businesses most impacted by coronavirus with nearly no upside potential and a lot of downside problems. No collateral. No personal guarantees. Use bank capital. Low interest rate (below risk free rate of return). Put money in the hands of high-risk businesses some of which were already in the fray. Backstopped at 75% by the SBA. Why the heck would banks want to do this? They don\u2019t. Many see it as a way to shore up their own client base, but even that has major league risks.<\/p>\n<p>We are also seeing a lot of banks dramatically increase their underwriting; they ask a few basic questions to make you feel like \u201cyou\u2019ve applied\u201d but then they ask for a lot of data to ensure your credit worthiness. Also, several banks are simulating the forgiveness component so they can assess the remaining loan, and eventually the bank\u2019s risk of both (forgiveness amount and remainder against your creditworthiness).<\/p>\n<p>As a quick funny, we now have our own version of Sooners\u2026 people sneaking across the Oklahoma state line to run out there and stake their claim before the land rush. Small business owners lining up to grab their PPP dollars like a race. PPP Sooners. We\u2019re gonna sell T Shirts. \u201cDaddy, tell me about PPP Sooners one more time before bed.\u201d \u201cSure son. Was the dark of the moon on the sixth of June in a Kenworth pullin\u2019 logs. Cab-over Pete with a reefer on and a Jimmy haulin\u2019 hogs.\u201d Wait, that\u2019s a song.<\/p>\n<\/div>\n\n\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\n\t\t\t\t\t<style><\/style>\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t\t\t\t<div class=\"info-box-wrapper\">\n\t\t\t\t<div id=\"wd-685dfd1e8579f\" class=\" wd-rs-685dfd1e8579f wd-info-box wd-wpb text-left box-icon-align-top box-style- color-scheme- wd-bg-none border-btm-title \">\n\t\t\t\t\t\t\t\t\t\t<div class=\"info-box-content\">\n\t\t\t\t\t\t<h2 class=\"info-box-title title wd-font-weight-800 box-title-style-default font-primary wd-fontsize-m\"><span class=\"ez-toc-section\" id=\"Small_Business_Administration_PPP_Loan_Basics\"><\/span>Small Business Administration PPP Loan Basics<span class=\"ez-toc-section-end\"><\/span><\/h2>\t\t\t\t\t\t<div class=\"info-box-inner reset-last-child\"><p>As mentioned in\u00a0<a href=\"https:\/\/wcginc.com\/blog\/covid-19-tax-stimulus\/\" target=\"_blank\" rel=\"noopener\">another blog post<\/a>, the CARES Act includes a $350 billion loan program titled Paycheck Protection Program for businesses with fewer than 500 employees (including sole proprietors, independent contractors and anyone otherwise self-employed). Under the bill, entities can use the funds to make payroll and cover other expenses, including rent, utilities, mortgage interest and interest on other debt obligations, from February 15, 2020, to June 30, 2020. Eligible entities may borrow up to $10 million, based on a formula tied to 2.5 times average monthly payroll, covering employees making up to $100,000 per year. A loan forgiveness component exists and is based on certain amounts spent for an eight-week period. Don\u2019t worry, we\u2019ll go into detail on PPP forgiveness since that is a major benefit of this loan.<\/p>\n<p><strong>Quick stats-<\/strong><\/p>\n<ul>\n<li>No collateral.<\/li>\n<li>No personal guarantees (non-recourse debt).<\/li>\n<li>4% interest on remaining loan balance after forgiveness, amortized 10 years (updated,\u00a0<a href=\"https:\/\/home.treasury.gov\/system\/files\/136\/PPP--Fact-Sheet.pdf\" target=\"_blank\" rel=\"noopener\">Treasury\u2019s PPP Fact Sheet<\/a>\u00a0reads 0.50% for two years).<\/li>\n<li>No prepayment penalty.<\/li>\n<\/ul>\n<p>\n<\/div>\n\n\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\n\t\t\t\t\t<style><\/style>\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t\t\t\t<div class=\"info-box-wrapper\">\n\t\t\t\t<div id=\"wd-685dfd2eb5886\" class=\" wd-rs-685dfd2eb5886 wd-info-box wd-wpb text-left box-icon-align-top box-style- color-scheme- wd-bg-none border-btm-title \">\n\t\t\t\t\t\t\t\t\t\t<div class=\"info-box-content\">\n\t\t\t\t\t\t<h2 class=\"info-box-title title wd-font-weight-800 box-title-style-default font-primary wd-fontsize-m\"><span class=\"ez-toc-section\" id=\"Paycheck_Protection_Program_Eligibility\"><\/span>Paycheck Protection Program Eligibility<span class=\"ez-toc-section-end\"><\/span><\/h2>\t\t\t\t\t\t<div class=\"info-box-inner reset-last-child\"><p>Here is a laundry list of businesses that are eligible for the SBA loan-<\/p>\n<ol>\n<li>A small business with fewer than 500 employees.<\/li>\n<li>A small business that otherwise meets the SBA\u2019s size standard.<\/li>\n<li>A 501(c)(3) with fewer than 500 employees.<\/li>\n<li>An individual who operates as a sole proprietor.<\/li>\n<li>An individual who operates as an independent contractor.<\/li>\n<li>An individual who is self-employed who regularly carries on any trade or business.<\/li>\n<li>A Tribal business concern that meets the SBA size standard<\/li>\n<li>A 501(c)(19) Veterans Organization that meets the SBA size standard.<\/li>\n<\/ol>\n<p>Most of these are straightforward. A few comments however\u2026<\/p>\n<p>The 500-employee threshold includes full-time and part-time employees including seasonal.<\/p>\n<p>Number 2 above is interesting since the SBA also may consider a business small based on sales for a particular industry. For example, NAICS code 112310 Chicken Egg Production is deemed a small business if sales are $16.5 million or less.<\/p>\n<p>Of course 4, 5 and 6 are awesome because it specifically calls out sole proprietors, independent contractors and self-employed people who otherwise might not have employees.<\/p>\n<p>NAICS 721 (Accommodations) and\u00a0<a href=\"https:\/\/www.bls.gov\/iag\/tgs\/iag722.htm\" target=\"_blank\" rel=\"noopener\">722 (Food Services and Drinking Places)<\/a>\u00a0use the 500-employee threshold on a per physical location basis.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"PPP_Certification\"><\/span>PPP Certification<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Small businesses must provide a good faith certification that-<\/p>\n<ol>\n<li>The uncertainty of current economic conditions makes the loan request necessary to support ongoing operations.<\/li>\n<li>The borrower will use the loan proceeds to retain workers and maintain payroll or make mortgage, lease, and utility payments.<\/li>\n<li>Borrower does not have an application pending for a loan duplicative of the purpose and amounts applied for here.<\/li>\n<li>From Feb. 15, 2020, to Dec. 31, 2020, the borrower has not received a loan duplicative of the purpose and amounts applied for with the Paycheck Protection Program.<\/li>\n<\/ol>\n<p>For WCG\u2026 and for many small businesses, the first certification is the basis for the loan in general. Predictive qualities of the future simply do not exist right now. As of March 28, mortgage rates are all over the map and jumbo loans (above $510,000) cannot even be quoted.<\/p>\n<p>As conversation fodder and in relation to number 1 above, consider the possible bookends-<\/p>\n<ul>\n<li>Restaurant owner, dentist, nail salon\u2026 definite Yes.<\/li>\n<li>DOD contractor, emergency room doctor, news journalist, toilet paper wholesaler\u2026 definite No.<\/li>\n<\/ul>\n<p>Where do you fall? Probably right between smack and dab.<\/p>\n<\/div>\n\n\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\n\t\t\t\t\t<style><\/style>\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t\t\t\t<div class=\"info-box-wrapper\">\n\t\t\t\t<div id=\"wd-685dfd4678cfc\" class=\" wd-rs-685dfd4678cfc wd-info-box wd-wpb text-left box-icon-align-top box-style- color-scheme- wd-bg-none border-btm-title \">\n\t\t\t\t\t\t\t\t\t\t<div class=\"info-box-content\">\n\t\t\t\t\t\t<h2 class=\"info-box-title title wd-font-weight-800 box-title-style-default font-primary wd-fontsize-m\"><span class=\"ez-toc-section\" id=\"How_Much_May_Be_Borrowed\"><\/span>How Much May Be Borrowed<span class=\"ez-toc-section-end\"><\/span><\/h2>\t\t\t\t\t\t<div class=\"info-box-inner reset-last-child\"><p>As stated above, eligible businesses may borrow up to $10 million, based on a formula tied to 2.5 times average monthly payroll, covering employees making up to $100,000 per year.<\/p>\n<p><strong>Quick basics-<\/strong>\u00a0Your loan amount is purely based on payroll costs. Your forgiveness amount is based on payroll costs in addition to mortgage loan interest, rent and utilities.<\/p>\n<p>Another way to look at this is\u2026 2.5 x monthly payroll is essentially 10.75 weeks of payroll costs. We\u2019ll talk about how this factors into loan forgiveness in a bit.<\/p>\n<p>However, according to<a href=\"https:\/\/home.treasury.gov\/system\/files\/136\/PPP--Fact-Sheet.pdf\" target=\"_blank\" rel=\"noopener\">Treasury\u2019s PPP Fact Sheet,<\/a>\u00a0there is wording like this, \u201cLoans can be for up to two months of your average monthly payroll costs from the last year plus an additional 25% of that amount.\u201d This is the same as 2.5 x monthly average. Not sure why they complicated it. 25% of 2.0 is 0.5. $100,000 x 2.5 is $250,000. $100,000 x 2 is $200,000 plus 25% is $250,000. Ugh!<\/p>\n<\/div>\n\n\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\n\t\t\t\t\t<style><\/style>\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t\t\t\t<div class=\"info-box-wrapper\">\n\t\t\t\t<div id=\"wd-685dfd6232337\" class=\" wd-rs-685dfd6232337 wd-info-box wd-wpb text-left box-icon-align-top box-style- color-scheme- wd-bg-none border-btm-title \">\n\t\t\t\t\t\t\t\t\t\t<div class=\"info-box-content\">\n\t\t\t\t\t\t<h2 class=\"info-box-title title wd-font-weight-800 box-title-style-default font-primary wd-fontsize-m\"><span class=\"ez-toc-section\" id=\"PPP_Payroll_Costs_Include\"><\/span>PPP Payroll Costs Include<span class=\"ez-toc-section-end\"><\/span><\/h2>\t\t\t\t\t\t<div class=\"info-box-inner reset-last-child\"><p>What is considered payroll? According to the code-<\/p>\n<p>(aa) the sum of payments of any compensation with respect to employees that is a\u2014<\/p>\n<p>(AA) salary, wage, commission, or similar compensation;<\/p>\n<p>(BB) payment of cash tip or equivalent;<\/p>\n<p>(CC) payment for vacation, parental, family, medical or sick leave;<\/p>\n<p>(DD) allowance for dismissal or separation;<\/p>\n<p>(EE) payment required for the provisions of group health care benefits, including insurance premiums;<\/p>\n<p>(FF) payment of any retirement benefit; or<\/p>\n<p>(GG) payment of State or local tax assessed on the compensation of employees; and<\/p>\n<p>(bb) the sum of payments of any compensation to or income of a sole proprietor or independent contractor that is a wage, commission, income, net earnings from self-employment or similar compensation and that is in an amount that is not more than $100,000 in 1 year, as prorated for the covered period;<\/p>\n<p><img decoding=\"async\" class=\"alignnone size-medium wp-image-23697\" src=\"https:\/\/wcginc.com\/wp-content\/uploads\/rave-300x183.jpg\" alt=\"\" width=\"300\" height=\"183\" srcset=\"https:\/\/wcginc.com\/wp-content\/uploads\/rave-300x183.jpg 300w, https:\/\/wcginc.com\/wp-content\/uploads\/rave.jpg 328w\" sizes=\"(max-width: 300px) 100vw, 300px\" \/>A lot of this also straightforward but there are a couple of gray areas.<\/p>\n<p>Under (aa)(EE) the code uses the term group health care benefits, however a sole proprietor typically does not have group health care. In addition, even a small business employee beyond the owner might have health insurance coverage that does not technically qualify as group health care. Also, does this include other employee benefits such as sort-term and long-term disability, or group life insurance?<\/p>\n<p>As a materially participating S Corp shareholder you are also an employee, so you would fit into the (AA) above. However, the (BB) section only mentions sole proprietor or independent contractor; as such we do not think you can consider net ordinary business income or shareholder distributions with respects to an S corporation\u2026 just W-2 wages paid to you capped at a $100,000. A few of you are kicking yourselves for keeping salary so low\u2026 but you might be able to amend prior payrolls before filing 2020 Q1 payroll filings.<\/p>\n<p>Under (aa)(GG), payment of state or local tax assessed on the compensation, employees would include state unemployment insurance benefits. Another example here in Colorado is Denver\u2019s employee tax. It is a tax that is assessed versus withheld\u2026 so state income taxes withheld do not count (which makes sense since it is already inclusive in the employee\u2019s wages).<\/p>\n<p>Under (bb), this is a conundrum since self-employed business owners want to minimize taxes and they might have made decisions in 2019 to use bonus depreciation or other deductions to dramatically reduce their net income. Now good tax planning might be coming back to bite them in the butt.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Contractors\"><\/span>Contractors<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>We\u2019ve been getting a lot of correspondence asking about contractors that you pay. By definition contractors are not employees, so our response as we see it is No. But! Look at the code above, there is a sneaky \u201cand\u201d at the end of (GG) under (aa) so it appears to also include contractors. Upon more reflection, this simple includes self-employment income into the definition of \u201cpayroll costs\u201d so those individuals can also obtain their own SBA loan under this program.<\/p>\n<p>Some business owners are arguing that they will have to \u201clayoff\u201d contractors if those payments are not included in the loan amount calculation. However, keep in mind that contractors as self-employed business owners are eligible for the PPP loan. Therefore, given their uncertainty based on your uncertainty, they can obtain SBA funds.<\/p>\n<p>And this would be a double-dip. You would get \u201ccredit\u201d for the amount paid to contractors when calculating your loan amount\u2026 and the the contractor could also get a similar loan based on the same dollar. Said in another way; the same dollar could be leveraged for an SBA PPP Loan by company ABC who issued a 1099 to company XYZ. Seems like a No No to us. But we didn\u2019t write the code. We\u2019ll have to wait and see on that.<\/p>\n<p>Consider this: you 1099 us, and we 1099 you. That is a net-zero transaction from an income tax perspective, but we just created PPP dollars. Insane! The Treasury\u2019s guidelines released on Thursday, April 2, say No.<\/p>\n<\/div>\n\n\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\n\t\t\t\t\t<style><\/style>\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t\t\t\t<div class=\"info-box-wrapper\">\n\t\t\t\t<div id=\"wd-685dfda5cf664\" class=\" wd-rs-685dfda5cf664 wd-info-box wd-wpb text-left box-icon-align-top box-style- color-scheme- wd-bg-none border-btm-title \">\n\t\t\t\t\t\t\t\t\t\t<div class=\"info-box-content\">\n\t\t\t\t\t\t<h2 class=\"info-box-title title wd-font-weight-800 box-title-style-default font-primary wd-fontsize-m\"><span class=\"ez-toc-section\" id=\"Payroll_Costs_Do_NOT_Include\"><\/span>Payroll Costs Do NOT Include<span class=\"ez-toc-section-end\"><\/span><\/h2>\t\t\t\t\t\t<div class=\"info-box-inner reset-last-child\"><p>Ok, so we know what is allowed\u2026 what is not allowed to be included? Straight from the code-<\/p>\n<p>(aa) the compensation of an individual employee in excess of an annual salary of $100,000, as prorated for the covered period;<\/p>\n<p>(bb) taxes imposed or withheld under chapters 21, 22 or 24 of the Internal Revenue Code of 1986 during the covered period;<\/p>\n<p>(cc) any compensation of an employee whose principal place of residence is outside of the United States;<\/p>\n<p>(dd) qualified sick leave wages for which a credit is allowed under section 7001 of the Families First Coronavirus Response Act (Public Law 116\u2013127); or<\/p>\n<p>(ee) qualified family leave wages for which a credit is allowed under section 7003 of the Families First Coronavirus Response Act (Public Law 116\u2013127); and<\/p>\n<p>How about some explanation? Chapter 21 refers to Social Security and Medicare taxes, Chapter 22 refers to Railroad Retirement and Chapter 24 refers to federal income tax. Subparagraph (cc) makes sense on some levels since this taxpayer is probably qualifying for the foreign earned income exclusion, so Congress \/ IRS doesn\u2019t want to double dip.<\/p>\n<p>ADP and our lovely AICPA was using net pay and not gross pay in their calculators. This is silly since when you pay someone $100 and withhold $30, it still costs you $100 not $70. The act of withholding taxes is a fiduciary relationship with your employee\u2026 the employer is facilitating the employee\u2019s tax obligations (Social Security, Medicare, Income Taxes). The cost is $100. Wait! There\u2019s more. Using net pay hurts S Corp business owners who juice up their withholdings to account for estimated tax payments. Using net pay penalizes these business owners who leverage payroll processing to pay for income taxes. Lastly, business owners shouldn\u2019t be penalized based on the withholding habits of their staff.<\/p>\n<p>The Treasury\u2019s interim guidelines issued on Thursday, April 2, they stated gross pay may be used. However, the forgiveness component still has language suggesting net pay for that calculation. We\u2019ll have to wait and see. For now, the loan amount is based on gross pay and not net pay. Nice!<\/p>\n<h3><span class=\"ez-toc-section\" id=\"K-1_Income\"><\/span>K-1 Income<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>As an S Corp shareholder, you wear two hats: investor and employee. The SBA Paycheck Protection Program is designed to help businesses float payroll so they don\u2019t lay a bunch of people off (3,300,000 unemployment claims in one week broke the old record in 1982 of 695,000). An argument could be made that K-1 income is considered self-employment income\u2026 if so, then you should also pay self-employment taxes on it but you don\u2019t. That is the S Corp loophole. As such, the K-1 income is not included in the payroll cost calculations (but we leave a lot of room for being redirected by the SBA when guidance comes out but we doubt it).<\/p>\n<\/div>\n\n\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\n\t\t\t\t\t<style><\/style>\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t\t\t\t<div class=\"info-box-wrapper\">\n\t\t\t\t<div id=\"wd-685dfdb4555ff\" class=\" wd-rs-685dfdb4555ff wd-info-box wd-wpb text-left box-icon-align-top box-style- color-scheme- wd-bg-none border-btm-title \">\n\t\t\t\t\t\t\t\t\t\t<div class=\"info-box-content\">\n\t\t\t\t\t\t<h2 class=\"info-box-title title wd-font-weight-800 box-title-style-default font-primary wd-fontsize-m\"><span class=\"ez-toc-section\" id=\"Employees_Greater_Than_100000\"><\/span>Employees Greater Than $100,000<span class=\"ez-toc-section-end\"><\/span><\/h2>\t\t\t\t\t\t<div class=\"info-box-inner reset-last-child\"><p>There is language in the Paycheck Protection Program tax code from H.R.748 that chats about those earning over $100,000. Here it is again (you just saw it)-<\/p>\n<p>Payroll costs shall not include\u2026 (aa) the compensation of an individual employee in excess of an annual salary of $100,000, as prorated for the covered period;<\/p>\n<p>You can read this one of two ways; those employees whose salaries exceed $100,000 are excluded. Or\u2026 more correctly\u2026 you can read it as those earning more than $100,000 are simply capped. When reading tax code, sometimes it is better to literally read it aloud. If that doesn\u2019t work, read it out loud with a beer. Ms. Jensen from the 10th grade would be disappointed for not knowing aloud from out loud.<\/p>\n<p>Back to the issue at hand\u2026 capping folks at $100,000 is fine. But what does this mean for partial years? As we understand the code, today, it means you have to annualize those employees who started mid-period. For example, you are looking back from April 1 2019 thru March 31 2020 to determine your payroll costs. Susie started October 1 2019, and you pay her $10,000 per month or $120,000 annualized. She\u2019s really good at her job.<\/p>\n<p>October 1 thru March 31 is magically two quarters or six months. Us dorky accountants like round numbers. Six months is $60,000. Can you use all $60,000? Nope. As we read the tax code and interpret the spirit, you would take $100,000 divided by $120,000 to find your quotient (ratio or protation)\u2026 and then multiply that against $60,000. Mr. Mudore from the 9th grade would say 5\/6 x 60,000 is the same as 5 x 10,000 or $50,000. This would be the amount included in your 12-month lookback.<\/p>\n<p>We\u2019ve always wanted to use the word quotient in a sentence.<\/p>\n<\/div>\n\n\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\n\t\t\t\t\t<style><\/style>\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t\t\t\t<div class=\"info-box-wrapper\">\n\t\t\t\t<div id=\"wd-685dfdc42a0fa\" class=\" wd-rs-685dfdc42a0fa wd-info-box wd-wpb text-left box-icon-align-top box-style- color-scheme- wd-bg-none border-btm-title img-right \">\n\t\t\t\t\t\t\t\t\t\t<div class=\"info-box-content\">\n\t\t\t\t\t\t<h2 class=\"info-box-title title wd-font-weight-800 box-title-style-default font-primary wd-fontsize-m\"><span class=\"ez-toc-section\" id=\"SBA_PPP_Loan_Forgiveness\"><\/span>SBA PPP Loan Forgiveness<span class=\"ez-toc-section-end\"><\/span><\/h2>\t\t\t\t\t\t<div class=\"info-box-inner reset-last-child\"><p>According to the CARES Act, payments can be deferred by up to a year, and businesses will be able to apply for forgiveness of the loan (or a portion of it), based on the amount used during the eight weeks following loan origination. The loan forgiveness amount, which is excluded from taxable income, is equal to the payroll costs, mortgage interest payments, rent and utility payments incurred or paid by a recipient during the covered period. So\u2026 not just payroll, which is nice!<\/p>\n<p>PPP forgiveness calculations is two-step process; what did you spend and is there a required adjustment for changes in your staffing.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Paycheck_Protection_Plan_Forgiveness_Amount_Step_1\"><\/span>Paycheck Protection Plan Forgiveness Amount (Step 1)<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The amount of forgiveness is the amount spent for eight weeks following loan \u201cclosing\u201d on payroll, rent, utilities and mortgage interest (any business loan interest, not just real estate). Here a snippet from Section 1106(b)-<\/p>\n<p>(b) Forgiveness.\u2014An eligible recipient shall be eligible for forgiveness of indebtedness on a covered loan in an amount equal to the sum of the following costs incurred and payments made during the covered period:<\/p>\n<p>(1) Payroll costs.<br \/>\n(2) Any payment of interest on any covered mortgage obligation (which shall not include any prepayment of or payment of principal on a covered mortgage obligation).<br \/>\n(3) Any payment on any covered rent obligation.<br \/>\n(4) Any covered utility payment.<\/p>\n<p>Just prior to that are some definitions under Section (a)<\/p>\n<p>(2) the term \u201ccovered mortgage obligation\u201d means any indebtedness or debt instrument incurred in the ordinary course of business that\u2014<\/p>\n<p>(A) is a liability of the borrower;<br \/>\n(B) is a mortgage on real or personal property; and<br \/>\n(C) was incurred before February 15, 2020;<\/p>\n<p>(3) the term \u201ccovered period\u201d means the 8-week period beginning on the date of the origination of a covered loan;<\/p>\n<p>(4) the term \u201ccovered rent obligation\u201d means rent obligated under a leasing agreement in force before February 15, 2020;<\/p>\n<p>(5) the term \u201ccovered utility payment\u201d means payment for a service for the distribution of electricity, gas, water, transportation, telephone, or internet access for which service began before February 15, 2020;<\/p>\n<p>So, let\u2019s break this down. Some time in the future when you are applying for loan forgiveness (which sounds like a trip to the dentist), you need to compute the monies spent on the big four (payroll, interest, rent and utilities)\u2026 and then determine a ratio to be applied if you experienced an employee \/ wage reduction. Any amount not forgiven would have a maximum interest rate of 4% on a 10-year amortization.<\/p>\n<p>Treasury from their\u00a0<a href=\"https:\/\/home.treasury.gov\/system\/files\/136\/PPP--Fact-Sheet.pdf\" target=\"_blank\" rel=\"noopener\">PPP Fact Sheet<\/a>\u00a0takes this list and modifies it slightly,<\/p>\n<ol>\n<li>Payroll costs, including benefits;<\/li>\n<li>Interest on mortgage obligations, incurred before February 15, 2020; (they probably mean in place or originated by)<\/li>\n<li>Rent, under lease agreements in force before February 15, 2020; and<\/li>\n<li>Utilities, for which service began before February 15, 2020.<\/li>\n<\/ol>\n<h3><span class=\"ez-toc-section\" id=\"Paycheck_Protection_Plan_Employee_Reductions_Step_2\"><\/span>Paycheck Protection Plan Employee Reductions (Step 2)<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The following is straight from the H.R.748 text under Section 1106, and is referencing the loan forgiveness calculations based on employees or pay reductions-<\/p>\n<p>(2) REDUCTION BASED ON REDUCTION IN NUMBER OF EMPLOYEES.\u2014<\/p>\n<p>(A) IN GENERAL.\u2014The amount of loan forgiveness under this section shall be reduced, but not increased, by multiplying the amount described in subsection (b) by the quotient obtained by dividing\u2014<\/p>\n<p>(i) the average number of full-time equivalent employees per month employed by the eligible recipient during the covered period; by<\/p>\n<p>(ii) (I) at the election of the borrower\u2014<\/p>\n<p>(aa) the average number of full-time equivalent employees per month employed by the eligible recipient during the period beginning on February 15, 2019 and ending on June 30, 2019; or<\/p>\n<p>(bb) the average number of full-time equivalent employees per month employed by the eligible recipient during the period beginning on January 1, 2020 and ending on February 29, 2020; or<\/p>\n<p>(II) in the case of an eligible recipient that is seasonal employer, as determined by the Administrator, the average number of full-time equivalent employees per month employed by the eligible recipient during the period beginning on February 15, 2019 and ending on June 30, 2019.<\/p>\n<p>(B) CALCULATION OF AVERAGE NUMBER OF EMPLOYEES.\u2014For purposes of subparagraph (A), the average number of full-time equivalent employees shall be determined by calculating the average number of full-time equivalent employees for each pay period falling within a month.<\/p>\n<p>The verbiage above is crazy complicated in text form. Let\u2019s try to say it another way.<\/p>\n<ol>\n<li><img decoding=\"async\" class=\"alignnone size-medium wp-image-23697\" src=\"https:\/\/wcginc.com\/wp-content\/uploads\/rave-300x183.jpg\" alt=\"\" width=\"300\" height=\"183\" srcset=\"https:\/\/wcginc.com\/wp-content\/uploads\/rave-300x183.jpg 300w, https:\/\/wcginc.com\/wp-content\/uploads\/rave.jpg 328w\" sizes=\"(max-width: 300px) 100vw, 300px\" \/>Calculate your payroll costs during the covered period (the eight week period after loan origination). Save that number.<\/li>\n<li>Calculate the average number of full-time equivalent (FTE) employees per month for the covered period. Multiple this by the payroll costs. This is your numerator.<br \/>\n<strong><br \/>\nCaution:<\/strong>\u00a0Recall that wages, salaries and commissions cannot exceed $100,000. So, during the period of February 15, 2020 through June 30, 2020, wages, salaries and commissions will be extrapolated (annualized) to determine any limits. In other words, you cannot pay yourself $100,000 during this period and expect it to be all forgiven. The maximum amount to pay yourself should be $15,385 for the 8-week period.<\/li>\n<\/ol>\n<p>Let\u2019s find your denominator (you select)-<\/p>\n<ol>\n<li>Average FTEs per month from February 15, 2019, to June 30, 2019 (seasonal employers pick Option 1), or<\/li>\n<li>Average FTEs per month from January 1, 2020, to February 29, 2020.<\/li>\n<\/ol>\n<p>Take your denominator and divide it into the numerator. This is your forgiveness reduction.<\/p>\n<p>Recall that your forgiveness amount is payroll costs, interest, rent and utilities\u2026 let\u2019s say that number is $150,000 and\u00a0 your full-time equivalents was 25 in the beginning of 2020. During the eight-week period, you had 23 FTEs. You had a staff reduction. Your loan forgiveness would be $150,000 x 23 \/ 25 or $138,000\u2026 a reduction of $12,000.<\/p>\n<p><strong>Sidebar:<\/strong>\u00a0A flyer by the U.S. Chamber of Commerce which is available below suggests that the forgiveness reduction (which is a double negative) is calculated on payroll costs only. But as we read the code, it is based on subsection (b) just above the calculation section and reads to include payroll, interest, rent and utilities. We\u2019ll await further guidance.<\/p>\n<p>There is no reduction if a borrower re-hires the employees who earlier were terminated. Check out (aa) and (bb) above again; if you grew in the second half of 2019, and then laid some employees off in March 2020, it might not negatively affect the loan forgiveness calculation.<\/p>\n<p>(3) REDUCTION RELATING TO SALARY AND WAGES.\u2014<\/p>\n<p>(A) IN GENERAL.\u2014The amount of loan forgiveness under this section shall be reduced by the amount of any reduction in total salary or wages of any employee described in subparagraph (B) during the covered period that is in excess of 25 percent of the total salary or wages of the employee during the most recent full quarter during which the employee was employed before the covered period.<\/p>\n<p>(B) EMPLOYEES DESCRIBED.\u2014An employee described in this subparagraph is any employee who did not receive, during any single pay period during 2019, wages or salary at an annualized rate of pay in an amount more than $100,000.<\/p>\n<p>This calculation is a bit more straight forward. If you reduce pay by more than 25%, the calculated forgiveness amount is reduced by the amount in excess of 25%. Let\u2019s say you pay someone $100,000 but you reduce their pay to $65,000. 25% of $100,000 is $25,000 but your reduction was $35,000. So, the Paycheck Protection Program loan forgiveness amount is reduced by $10,000 ($35,000 less $25,000).<\/p>\n<\/div>\n\n\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\n\t\t\t\t\t<style><\/style>\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t\t\t\t<div class=\"info-box-wrapper\">\n\t\t\t\t<div id=\"wd-685dfe675117d\" class=\" wd-rs-685dfe675117d wd-info-box wd-wpb text-left box-icon-align-top box-style- color-scheme- wd-bg-none border-btm-title img-right \">\n\t\t\t\t\t\t\t\t\t\t<div class=\"info-box-content\">\n\t\t\t\t\t\t<h2 class=\"info-box-title title wd-font-weight-800 box-title-style-default font-primary wd-fontsize-m\"><span class=\"ez-toc-section\" id=\"Quickie_PPP_Calculations\"><\/span>Quickie PPP Calculations<span class=\"ez-toc-section-end\"><\/span><\/h2>\t\t\t\t\t\t<div class=\"info-box-inner reset-last-child\"><p>Here are two numbers to quickly arrive at some super basic numbers. To find the loan amount estimate take\u00a0<strong>0.21 x (annual salary + health insurance)<\/strong>. The does not factor in SALT or other income limits. SALT is fancy for state and local tax.<\/p>\n<p>To find the loan forgiveness estimate take\u00a0<strong>0.15 x (annual salary + health insurance)<\/strong>. This is mainly for those without rent, utilities and interest.<\/p>\n<p>0.21 comes 2.5 x 4.3 \/ 52<br \/>\n0.15 comes from 8 \/ 52<\/p>\n<\/div>\n\n\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\n\t\t\t\t\t<style><\/style>\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t\t\t\t<div class=\"info-box-wrapper\">\n\t\t\t\t<div id=\"wd-685dfe766f9d5\" class=\" wd-rs-685dfe766f9d5 wd-info-box wd-wpb text-left box-icon-align-top box-style- color-scheme- wd-bg-none border-btm-title img-right \">\n\t\t\t\t\t\t\t\t\t\t<div class=\"info-box-content\">\n\t\t\t\t\t\t<h2 class=\"info-box-title title wd-font-weight-800 box-title-style-default font-primary wd-fontsize-m\"><span class=\"ez-toc-section\" id=\"Loan_Forgiveness_Analysis\"><\/span>Loan Forgiveness Analysis<span class=\"ez-toc-section-end\"><\/span><\/h2>\t\t\t\t\t\t<div class=\"info-box-inner reset-last-child\"><p>Aside from the calculations, there are some things to consider. The loan amount is determined by 2.5 x average monthly payroll costs. If you take 2.5 x 4.3 weeks in a month, you get 10.75 weeks. So, the loan amount is based on 10.75 weeks of payroll costs but the forgiveness amount is based on 8 weeks\u2026 however, the forgiveness amount also includes interest, rent and utilities. Some interesting dynamics start to emerge.<\/p>\n<p>According to the application, payroll must be at least 75% for the loan to be forgiven. This threshold certain needs more clarification since a restaurant will have a much higher rent than payroll ratio, and those the businesses most severely affected. Here is the wording from Treasury, \u201cDue to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs.\u201d<\/p>\n<p>If you are a business with high labor costs, a PPP loan from the SBA will be great from a loan amount perspective. But if you also have material amounts of interest and rent expense, the forgiveness calculation will be amazing. Conversely, if your top three expenses do not include payroll, interest or rent (like cost of goods sold, depreciation on machinery, etc.), the Paycheck Protection Program loan might not have as much teeth. Let\u2019s not forget the terms are 4% amortized over 10 years; so whatever you can get regardless of loan forgiveness might be a win.<\/p>\n<p>Recall that payroll isn\u2019t always every two weeks for some businesses\u2026 so these semi-monthly or monthly payroll cadences don\u2019t fit nicely into 8 weeks. Rent and utilities are also a monthly cost, and business loan interest varies depending on the loan terms (adjustable? daily compound? simple interest?). So there will be some mental gymnastics when it comes time to apply for PPP loan forgiveness. \u201cMy 8 weeks started June 7, but I paid rent June 1.\u201d or consider that 2 months is truly 8.6 weeks\u2026 the 0.6 might swing numbers a lot. Again, some math nuances that we will all need to sort through.<\/p>\n<p>Also! There might be some arbitrage in finding the right loan origination date based on forecasted changes to your business. For example, do you have someone going on family leave for a new baby soon? Perhaps you time the loan origination to align with his or her return such as May 1.<\/p>\n<p>One more thing\u2026 as alluded to earlier\u2026 there is a cap of $100,000 for wages, salaries and commissions. But there is a proration limit during the covered period of February 15, 2020 through June 30, 2020. In other words, we have to be careful how much is paid during this time since you could be shooting yourself in the foot with too high of salaries to owners (or others). Keep in mind that we want salaries to be as low as we reasonably can for shareholders of S Corps since we still want to save on Social Security and Medicare taxes. We need to optimize!<\/p>\n<\/div>\n\n\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\n\t\t\t\t\t<style><\/style>\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t\t\t\t<div class=\"info-box-wrapper\">\n\t\t\t\t<div id=\"wd-685dfe85789fe\" class=\" wd-rs-685dfe85789fe wd-info-box wd-wpb text-left box-icon-align-top box-style- color-scheme- wd-bg-none border-btm-title img-right \">\n\t\t\t\t\t\t\t\t\t\t<div class=\"info-box-content\">\n\t\t\t\t\t\t<h2 class=\"info-box-title title wd-font-weight-800 box-title-style-default font-primary wd-fontsize-m\"><span class=\"ez-toc-section\" id=\"Loan_Forgiveness_Scams\"><\/span>Loan Forgiveness Scams<span class=\"ez-toc-section-end\"><\/span><\/h2>\t\t\t\t\t\t<div class=\"info-box-inner reset-last-child\"><p>Aahh! We got your attention on this one. Small business owners are going to want to maximize payroll and rental expenses to increase the paycheck protection program forgiveness. Here are some crazy half-baked ideas that we preemptively know people will try-<\/p>\n<ol>\n<li>Adding your spouse or children to payroll during the 8-week period.<\/li>\n<li>Adding crazy Eddie to your payroll and having him kickback the paycheck. Sure, it costs you 15.3% in FICA taxes but you get an FTE head count for PPP loan forgiveness.<\/li>\n<li>Juicing your staff\u2019s pay during the period and then shrinking it later in the year.<\/li>\n<li>Prepaying rent to your landlord.<\/li>\n<li>Entering into a rental agreement with yourself for the use of your home office.<\/li>\n<\/ol>\n<p>We suspect the loan forgiveness process will be a mini-audit\u2026 and they will probably be approaching it from a \u201cyeah, right\u201d perspective. Let\u2019s not give them reasons to deny the forgiveness.<\/p>\n<\/div>\n\n\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\n\t\t\t\t\t<style><\/style>\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t\t\t\t<div class=\"info-box-wrapper\">\n\t\t\t\t<div id=\"wd-685dfe95179cd\" class=\" wd-rs-685dfe95179cd wd-info-box wd-wpb text-left box-icon-align-top box-style- color-scheme- wd-bg-none border-btm-title img-right \">\n\t\t\t\t\t\t\t\t\t\t<div class=\"info-box-content\">\n\t\t\t\t\t\t<h2 class=\"info-box-title title wd-font-weight-800 box-title-style-default font-primary wd-fontsize-m\"><span class=\"ez-toc-section\" id=\"What_Is_WCG_Doing\"><\/span>What Is WCG Doing?<span class=\"ez-toc-section-end\"><\/span><\/h2>\t\t\t\t\t\t<div class=\"info-box-inner reset-last-child\"><p>Like everyone, we are very concerned about the short-term future economy and resulting cash flow. Our predictive confidence is zero; we just don\u2019t know. We anticipate obtaining a PPP loan for about $350,000 and we estimated that our expenses above (payroll, rent, utilities and interest) will be about $260,000 for an eight-week period. That amount should be forgiven leaving a $90,000 loan at 4% amortized for 10 years with 6 months of deferred payments.<\/p>\n<p>We can assist you with the Paycheck Protection Program process and your eventual loan application! We will-<\/p>\n<ol>\n<li>help determine your eligibility,<\/li>\n<li>help put together your payroll cost figures by working with your payroll provider and bookkeeper,<\/li>\n<li>answer questions you might have about the process, timing, forgiveness calculations, etc.<\/li>\n<\/ol>\n<p>Our fee is a $750 retainer which is applied to our typical hourly rates for PPP loan calculations. We\u2019ve put together about 35 of these so far (April 1 at 4:40PM), and we\u2019ve been spending about 1.5-2.5 hours per client at $150 per hour. The higher hours were for clients who had a lot of employees or a lot of medical \/ 401k stuff. The retainer is a bit high, but we don\u2019t know what other crud the bank will want\u2026 and that our clients will need our help with.<\/p>\n<p>We cannot complete or execute the loan application directly (we cannot be your agent). On the back-end we will also help with the forgiveness process (which will be a separate engagement). We have not a clue today of what that entails, and frankly it sounds miserable. But! We\u2019ll help you get through it as well.<\/p>\n<p>Our engagement agreement reads in part, \u201cThe Firm will not perform bookkeeping functions for the completion of the Engagement. The Firm will not be an agent. Specifically, we will compile financial data to arrive at the payroll costs calculation; it is your responsibility to complete and execute the loan application.\u201d<\/p>\n<p>We routinely recommend two banks to work with for SBA lending: Colorado Bank and Trust for our Colorado businesses, and Wells Fargo for our non-Colorado businesses. Why? We know their systems\u2026 what the bank wants, what the bank doesn\u2019t want, the format, the forms, etc. This creates efficiencies in our data hunting. If a loan processor gets two applications, one in a recognized format with a pretty bow on it, and another from an unknown borrower with duct tape and bubble gum, we hope the familiar one gets done first. Of course, we also recommend talking to your local bank.<\/p>\n<p>We have also assembled a Triple-P Task Force which includes Jason Watson, Amanda Patten, Kate Wraight, Chelsea Ryan and Nate Cockle with a distro of\u00a0ppp@wcginc.com.\u00a0<strong>There are two unanswered questions by us and others<\/strong>; gross pay versus net pay, and 1099 contractors. We think gross pay\u2026 and no to contractors as payroll costs for employers. But we\u2019ll see\u2026<\/p>\n<\/div>\n\n\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\n\t\t\t\t\t<style><\/style>\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t\t\t\t<div class=\"info-box-wrapper\">\n\t\t\t\t<div id=\"wd-685dfe95179cd\" class=\" wd-rs-685dfe95179cd wd-info-box wd-wpb text-left box-icon-align-top box-style- color-scheme- wd-bg-none border-btm-title img-right \">\n\t\t\t\t\t\t\t\t\t\t<div class=\"info-box-content\">\n\t\t\t\t\t\t<h2 class=\"info-box-title title wd-font-weight-800 box-title-style-default font-primary wd-fontsize-m\"><span class=\"ez-toc-section\" id=\"What_Is_WCG_Doing-2\"><\/span>What Is WCG Doing?<span class=\"ez-toc-section-end\"><\/span><\/h2>\t\t\t\t\t\t<div class=\"info-box-inner reset-last-child\"><p>Like everyone, we are very concerned about the short-term future economy and resulting cash flow. Our predictive confidence is zero; we just don\u2019t know. We anticipate obtaining a PPP loan for about $350,000 and we estimated that our expenses above (payroll, rent, utilities and interest) will be about $260,000 for an eight-week period. That amount should be forgiven leaving a $90,000 loan at 4% amortized for 10 years with 6 months of deferred payments.<\/p>\n<p>We can assist you with the Paycheck Protection Program process and your eventual loan application! We will-<\/p>\n<ol>\n<li>help determine your eligibility,<\/li>\n<li>help put together your payroll cost figures by working with your payroll provider and bookkeeper,<\/li>\n<li>answer questions you might have about the process, timing, forgiveness calculations, etc.<\/li>\n<\/ol>\n<p>Our fee is a $750 retainer which is applied to our typical hourly rates for PPP loan calculations. We\u2019ve put together about 35 of these so far (April 1 at 4:40PM), and we\u2019ve been spending about 1.5-2.5 hours per client at $150 per hour. The higher hours were for clients who had a lot of employees or a lot of medical \/ 401k stuff. The retainer is a bit high, but we don\u2019t know what other crud the bank will want\u2026 and that our clients will need our help with.<\/p>\n<p>We cannot complete or execute the loan application directly (we cannot be your agent). On the back-end we will also help with the forgiveness process (which will be a separate engagement). We have not a clue today of what that entails, and frankly it sounds miserable. But! We\u2019ll help you get through it as well.<\/p>\n<p>Our engagement agreement reads in part, \u201cThe Firm will not perform bookkeeping functions for the completion of the Engagement. The Firm will not be an agent. Specifically, we will compile financial data to arrive at the payroll costs calculation; it is your responsibility to complete and execute the loan application.\u201d<\/p>\n<p>We routinely recommend two banks to work with for SBA lending: Colorado Bank and Trust for our Colorado businesses, and Wells Fargo for our non-Colorado businesses. Why? We know their systems\u2026 what the bank wants, what the bank doesn\u2019t want, the format, the forms, etc. This creates efficiencies in our data hunting. If a loan processor gets two applications, one in a recognized format with a pretty bow on it, and another from an unknown borrower with duct tape and bubble gum, we hope the familiar one gets done first. Of course, we also recommend talking to your local bank.<\/p>\n<p>We have also assembled a Triple-P Task Force which includes Jason Watson, Amanda Patten, Kate Wraight, Chelsea Ryan and Nate Cockle with a distro of\u00a0ppp@wcginc.com.\u00a0<strong>There are two unanswered questions by us and others<\/strong>; gross pay versus net pay, and 1099 contractors. We think gross pay\u2026 and no to contractors as payroll costs for employers. But we\u2019ll see\u2026<\/p>\n<\/div>\n\n\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\n\t\t\t\t\t<style><\/style>\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t\t\t\t<div class=\"info-box-wrapper\">\n\t\t\t\t<div id=\"wd-685dfee213093\" class=\" wd-rs-685dfee213093 wd-info-box wd-wpb text-left box-icon-align-top box-style- color-scheme- wd-bg-none border-btm-title img-right \">\n\t\t\t\t\t\t\t\t\t\t<div class=\"info-box-content\">\n\t\t\t\t\t\t<h2 class=\"info-box-title title wd-font-weight-800 box-title-style-default font-primary wd-fontsize-m\"><span class=\"ez-toc-section\" id=\"Paycheck_Protection_Program_Application\"><\/span>Paycheck Protection Program Application<span class=\"ez-toc-section-end\"><\/span><\/h2>\t\t\t\t\t\t<div class=\"info-box-inner reset-last-child\"><p>This is different than the SBA Economic Injury Disaster Loan program (see below). The loan described above is administered through private institutions such as banks, where as the loan described below is a direct loan through the Small Business Administration.<\/p>\n<p>The first button below is our checklist for gathering the required documentation and financial data which supplements the loan application. The second button below is a 2-page PDF from Central Bank &amp; Trust, a Colorado bank that WCG is using, that does a lot of SBA lending including the PPP loan (Paychecks Protection Plan). We don\u2019t have a Wells Fargo handout yet.<\/p>\n<p><strong>Updated!<\/strong>\u00a0The SBA just released their application (see below). They were on v1 around 1:00PM and by 4:30PM they were on v3. Nice. The form is super simple\u2026 the only complication is the payroll cost calculation and supporting detail.<\/p>\n<p>Banks are scrambling to figure this stuff out; high call volumes during a time when the whole country is at half-staff. Lovely! From our understanding, banks will only take on current customers. Why? They must do a quick internal credit check. You apply. They review, and then submit the data to the SBA. The SBA gives an approval. The bank does another version and underwriting, and then disburses funds. They have a ton of risk (see quick thoughts above) and as such will only deal with those customers who have a relationship.<\/p>\n<\/div>\n\n\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\n\t\t\t\t\t<style><\/style>\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t\t\t\t<div class=\"info-box-wrapper\">\n\t\t\t\t<div id=\"wd-68b57d902f789\" class=\" wd-rs-68b57d902f789 wd-info-box wd-wpb text-left box-icon-align-top box-style- color-scheme- wd-bg-none border-btm-title faqs-wrap \">\n\t\t\t\t\t\t\t\t\t\t<div class=\"info-box-content\">\n\t\t\t\t\t\t<h2 class=\"info-box-title title box-title-style-default wd-fontsize-m\"><span class=\"ez-toc-section\" id=\"Frequently_Asked_Questions\"><\/span>Frequently Asked Questions<span class=\"ez-toc-section-end\"><\/span><\/h2>\t\t\t\t\t\t<div class=\"info-box-inner reset-last-child\"><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Who_qualifies_for_a_PPP_loan\"><\/span>Who qualifies for a PPP loan?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Small businesses under 500 employees, sole proprietors, independent contractors, self-employed individuals, and certain nonprofits.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"What_can_PPP_loan_funds_be_used_for\"><\/span>What can PPP loan funds be used for?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Payroll, mortgage interest, rent, and utilities incurred or paid during the covered period.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Is_collateral_or_a_personal_guarantee_required\"><\/span>Is collateral or a personal guarantee required?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>No, the loan is non-recourse with no collateral required.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"What_is_the_loan_forgiveness_period\"><\/span>What is the loan forgiveness period?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Eight weeks following loan disbursement.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"How_are_payroll_costs_calculated_for_forgiveness\"><\/span>How are payroll costs calculated for forgiveness?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Gross wages, benefits, and other payroll-related expenses, capped at $100,000 per employee for the covered period.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Are_contractors_included_in_payroll_costs\"><\/span>Are contractors included in payroll costs?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>No, contractors are generally not included for employer forgiveness calculations, but they may get their own PPP loans.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"What_happens_if_I_reduce_staff_or_wages\"><\/span>What happens if I reduce staff or wages?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Forgiveness may be reduced proportionally; re-hiring employees can restore forgiveness.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Are_K-1_distributions_included_in_payroll_costs\"><\/span>Are K-1 distributions included in payroll costs?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>No, only W-2 wages of S Corp shareholders are included.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Can_I_prepay_rent_or_add_family_to_payroll_to_increase_forgiveness\"><\/span>Can I prepay rent or add family to payroll to increase forgiveness?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>No, such tactics could jeopardize forgiveness and are discouraged.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"How_can_WCG_help\"><\/span>How can WCG help?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>WCG assists with eligibility review, payroll calculations, and guidance on the PPP application and forgiveness process, but clients execute the loan themselves.<\/p>\n<\/div>\n\n\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\n\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t[\/vc_column][\/vc_row]<\/p>\n<\/div>","protected":false},"excerpt":{"rendered":"<p>[vc_row][vc_column][\/vc_column][\/vc_row]<\/p>\n","protected":false},"author":6,"featured_media":41798,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[17],"tags":[],"class_list":["post-25611","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v27.8 (Yoast SEO v27.8) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Paycheck Protection Program - WCG CPAs &amp; Advisors<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/wcginc.com\/blog\/paycheck-protection-program\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Paycheck Protection Program\" \/>\n<meta property=\"og:description\" content=\"[vc_row][vc_column][\/vc_column][\/vc_row]\" \/>\n<meta property=\"og:url\" content=\"https:\/\/wcginc.com\/blog\/paycheck-protection-program\/\" \/>\n<meta property=\"og:site_name\" content=\"WCG CPAs &amp; Advisors\" \/>\n<meta property=\"article:published_time\" content=\"2020-03-28T02:05:21+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2026-01-26T16:36:47+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/wcginc.com\/wp-content\/uploads\/Online-Accountant.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"622\" \/>\n\t<meta property=\"og:image:height\" content=\"622\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Jason Watson\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Jason Watson\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"31 minutes\" \/>\n<!-- \/ Yoast SEO Premium plugin. -->","yoast_head_json":{"title":"Paycheck Protection Program - WCG CPAs &amp; Advisors","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/wcginc.com\/blog\/paycheck-protection-program\/","og_locale":"en_US","og_type":"article","og_title":"Paycheck Protection Program","og_description":"[vc_row][vc_column][\/vc_column][\/vc_row]","og_url":"https:\/\/wcginc.com\/blog\/paycheck-protection-program\/","og_site_name":"WCG CPAs &amp; Advisors","article_published_time":"2020-03-28T02:05:21+00:00","article_modified_time":"2026-01-26T16:36:47+00:00","og_image":[{"width":622,"height":622,"url":"https:\/\/wcginc.com\/wp-content\/uploads\/Online-Accountant.jpg","type":"image\/jpeg"}],"author":"Jason Watson","twitter_card":"summary_large_image","twitter_misc":{"Written by":"Jason Watson","Est. reading time":"31 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/wcginc.com\/blog\/paycheck-protection-program\/#article","isPartOf":{"@id":"https:\/\/wcginc.com\/blog\/paycheck-protection-program\/"},"author":{"name":"Jason Watson","@id":"https:\/\/wcginc.com\/#\/schema\/person\/0225b77adcec813c7746e7806e0482f9"},"headline":"Paycheck Protection Program","datePublished":"2020-03-28T02:05:21+00:00","dateModified":"2026-01-26T16:36:47+00:00","mainEntityOfPage":{"@id":"https:\/\/wcginc.com\/blog\/paycheck-protection-program\/"},"wordCount":9333,"publisher":{"@id":"https:\/\/wcginc.com\/#organization"},"image":{"@id":"https:\/\/wcginc.com\/blog\/paycheck-protection-program\/#primaryimage"},"thumbnailUrl":"https:\/\/wcginc.com\/wp-content\/uploads\/Online-Accountant.jpg","articleSection":["Blog"],"inLanguage":"en-US"},{"@type":"WebPage","@id":"https:\/\/wcginc.com\/blog\/paycheck-protection-program\/","url":"https:\/\/wcginc.com\/blog\/paycheck-protection-program\/","name":"Paycheck Protection Program - WCG CPAs &amp; Advisors","isPartOf":{"@id":"https:\/\/wcginc.com\/#website"},"primaryImageOfPage":{"@id":"https:\/\/wcginc.com\/blog\/paycheck-protection-program\/#primaryimage"},"image":{"@id":"https:\/\/wcginc.com\/blog\/paycheck-protection-program\/#primaryimage"},"thumbnailUrl":"https:\/\/wcginc.com\/wp-content\/uploads\/Online-Accountant.jpg","datePublished":"2020-03-28T02:05:21+00:00","dateModified":"2026-01-26T16:36:47+00:00","breadcrumb":{"@id":"https:\/\/wcginc.com\/blog\/paycheck-protection-program\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/wcginc.com\/blog\/paycheck-protection-program\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/wcginc.com\/blog\/paycheck-protection-program\/#primaryimage","url":"https:\/\/wcginc.com\/wp-content\/uploads\/Online-Accountant.jpg","contentUrl":"https:\/\/wcginc.com\/wp-content\/uploads\/Online-Accountant.jpg","width":622,"height":622},{"@type":"BreadcrumbList","@id":"https:\/\/wcginc.com\/blog\/paycheck-protection-program\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/wcginc.com\/"},{"@type":"ListItem","position":2,"name":"Paycheck Protection Program"}]},{"@type":"WebSite","@id":"https:\/\/wcginc.com\/#website","url":"https:\/\/wcginc.com\/","name":"wcginc.com","description":"","publisher":{"@id":"https:\/\/wcginc.com\/#organization"},"potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/wcginc.com\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Organization","@id":"https:\/\/wcginc.com\/#organization","name":"wcginc.com","alternateName":"WCG CPAs & Advisors","url":"https:\/\/wcginc.com\/","logo":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/wcginc.com\/#\/schema\/logo\/image\/","url":"https:\/\/wcginc.com\/wp-content\/uploads\/wcg-logo.png","contentUrl":"https:\/\/wcginc.com\/wp-content\/uploads\/wcg-logo.png","width":521,"height":137,"caption":"wcginc.com"},"image":{"@id":"https:\/\/wcginc.com\/#\/schema\/logo\/image\/"}},{"@type":"Person","@id":"https:\/\/wcginc.com\/#\/schema\/person\/0225b77adcec813c7746e7806e0482f9","name":"Jason Watson","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/secure.gravatar.com\/avatar\/bbdcd194ef70d6f0f47f42fabed228d98b5486d05531f4b3bf6147ac67dda9df?s=96&d=mm&r=g","url":"https:\/\/secure.gravatar.com\/avatar\/bbdcd194ef70d6f0f47f42fabed228d98b5486d05531f4b3bf6147ac67dda9df?s=96&d=mm&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/bbdcd194ef70d6f0f47f42fabed228d98b5486d05531f4b3bf6147ac67dda9df?s=96&d=mm&r=g","caption":"Jason Watson"},"description":"Jason Watson is a Senior Partner for WCG CPAs &amp; Advisors, a boutique yet progressive tax, accounting and consultation CPA firm located in Colorado Springs, Colorado. He has been an owner of three small businesses, and holds both a Bachelor\u2019s and Master\u2019s in Business Administration from the University of Wisconsin \u2013 Madison.","url":"https:\/\/wcginc.com\/author\/jason\/"}]}},"_links":{"self":[{"href":"https:\/\/wcginc.com\/wp-json\/wp\/v2\/posts\/25611","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/wcginc.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/wcginc.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/wcginc.com\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/wcginc.com\/wp-json\/wp\/v2\/comments?post=25611"}],"version-history":[{"count":3,"href":"https:\/\/wcginc.com\/wp-json\/wp\/v2\/posts\/25611\/revisions"}],"predecessor-version":[{"id":90200,"href":"https:\/\/wcginc.com\/wp-json\/wp\/v2\/posts\/25611\/revisions\/90200"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/wcginc.com\/wp-json\/wp\/v2\/media\/41798"}],"wp:attachment":[{"href":"https:\/\/wcginc.com\/wp-json\/wp\/v2\/media?parent=25611"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/wcginc.com\/wp-json\/wp\/v2\/categories?post=25611"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/wcginc.com\/wp-json\/wp\/v2\/tags?post=25611"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}