Get Down With PPP (Forgiveness!)

Most of my colleagues and I have been glued to everything the US. Department of Treasury has had to say related to the Paycheck Protection Program (PPP) of the CARES Act. It is all we have thought about since the middle of March 2020. It is no surprise that we are just as flustered, confused, and displeased with how this program has been shaping up. As of yesterday, the House passed their proposed changes to this bill, still waiting at the floor of the Senate to chime in. This new proposed bill would extend the usage period from 8 weeks to 24 weeks. Also, it would extend the time to restore at least 75% of your payroll cost and FTE’s to December 31st from June 30. The proposed pay back period (maturity date) is 5 years from 2 years. Here are most up-to-date FAQ’s per the SBA website for most asked questions.

I sat through a 4 hour webinar yesterday held by the NCACPA , conducted by Don Farmer CPA. Don is whom I consider the tax expert in our state. I wanted to share some of my takeaways, and the answers to the most asked questions. There are still PPP funds available to shell out. Here is the most recent report by the SBA on the PPP Loan statistics.

When applying for forgiveness, the banks may have their own in-house form, but here is the official form 3508 by the SBA for you to get a head start on. Also, the AICPA has come up with spreadsheets to help you calculate the numbers required for the forgiveness application.

CLICK BELOW FOR THE SPREADSHEET (there is a separate one for self-employed):



My takeaways on how to interpret the instructions:

Here is the SBA’s Interim Final Rule on PPP Forgiveness.

Per Don Farmer, CPA’s and bankers need to interpret the rules for their clients the best they can and have sound judgement in applying them to be able to defend them. The rules are so easily able to be interpreted in many ways.

  1. In identifying a Full Time Equivalent employee (FTE) it is based on 40 hours. An employee that works 40 hours or above is considered 1 FTE and an employee that works less than 40 hour is considered .5 FTE.
  2. There is an “Alternative Pay Period” the business can choose, which states that the payroll period could have started BEFORE PPP funds were received and paid after the receipt date as the first pay. The final pay period can be accrued to the end of the 8 week period (as the pay date will be after the 8 week period). In some cases this is advantageous and results in a higher dollar amount for the payroll portion of the calculation. You will have to be consistent in using the same method, when calculating the base period comparison (Base period will be 2/15/19-6/30/19 OR Q1 2020).
  3. 8 weeks equals 55 days after the date the funds were received.
  4. If you had a $15/hour employee that worked 40 hours in the base period and now works 20 hours (at the same hourly rate or salary), they are still considered a whole FTE. They do not have to be necessarily working, you just need to be paying them. The result of the lower hours has to be that your business is reduced or shut down due to COVID-19.
  5. The EIDL Advance is considered in the equation and REDUCES YOUR PPP LOAN FORGIVENESS. That will be in the unforgiven portion of the PPP loan.
  6. You can prepay rent and utilities, as long as you had them at 2/15/20.
  7. You can pay your spouse/family members a salary, as long as they are working in the business, and that will count towards forgiveness
  8. Utilities, which can be no more than 25% of the PPP Funds, include gas, water, electricity, phone, internet, interest on auto leases, interest on business mortgages (or business equipment), and TRANSPORTATION
  9. TRANSPORTATION costs are included in the definition of Utilities, and they would relate to gas used in the company’s vehicle, and mileage expense reimbursed to an employee.
  10. You have 60 days to ask for forgiveness once your 8 week period is over and the SBA has 90 days to respond. If that falls past the 6 month payment deferral timeframe, and you have to make a payment towards the loan (while you are waiting), the bank will have to reimburse you for the portion that was forgiven.
  11. On the very top of the form, it asks for # of Employees, and that is not equated to FTE’s. It literally is the number of warm bodies that are on your W2 payroll.
  12. The FTE reduction formula is complicated but not impossible. The AICPA spreadsheets above should help you with that. You will need to look at this on the individual employee level.
  13. The forgiven portion of the loan is tax free, however, you will not be able to deduct these expenses on your tax return.  It is in the proposed bill that these expenses be deductible.
  14. If an employee declines your work offer and you have that in writing, you may still count them as an FTE. You will calculate your FTE’s on the PPP Schedule A Worksheet.
  15. Documentation can include: 3rd party payroll registers, 941 reports for the period covered, cancelled checks, official amortization statements from lender, utilities statements, bank statements. It does not require that you have the lease agreement between you and your landlord.
  16. Bonuses are fine, as long as they don’t go over the 8/52 * 2019 total compensation (not to exceed $15,385 per employee).

For more information, contact me at

And good luck! You are not alone!



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