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Paycheck Protection Program (PPP) Loan Forgiveness Application Now Available


On Friday, May 15, the Small Business Administration (SBA) released the Paycheck Protection Program (PPP) Loan Forgiveness Application and instructions.  The form and instructions help to bring clarification to questions around the forgiveness program.  The SBA requires the Loan Forgiveness Application and Schedule A of the application to be submitted.  During the 8-week forgiveness period, it is important for borrowers to maintain supporting documentation over the course of the forgiveness period.  The SBA has provided a Schedule A worksheet to help with calculations, but it is not required in the submission.  The application can be found on the SBA website here: Paycheck Protection Program Loan Forgiveness Application.

Payroll Costs

Payroll is a large area in which guidance is provided.  As initially noted by the SBA, the 8 weeks covered within the forgiveness period begins on the date PPP funds were received (referred to as the “covered period”).  If funds are received over multiple dates, the borrower is to use the first date in which PPP funds were received. 

Since the first day of a payroll period cycle falls in the middle of the “covered period” for a majority of borrowers, the SBA has offered an “alternative payroll covered period”.  Businesses may choose an alternative 8-week forgiveness period.  The 8-week period commencement date can be the first day of the first payroll period following the first PPP funding.  For example, if loan proceeds were received on Monday, April 20, and the first day of the first pay period following PPP funding is Sunday, April 26, the first day of the alternative payroll covered period is April 26.  The ending date would be 8 weeks later (56 days), which is Saturday, June 20.  This alternative period is only for payroll costs; it is not for nonpayroll costs of the forgiveness calculation.  The forgiveness application identifies when the covered period should be used. 

Payroll costs eligible for forgiveness are costs that are incurred and paid within the 8-week forgiveness period.  Payroll costs are considered incurred on the day the employee’s pay is earned.  Payroll costs that are incurred but not paid during the last day of the covered period (or alternative payroll period) are eligible for forgiveness if paid on or before the next regular payroll cycle.  Payroll costs include:

  • Cash compensation of gross wages, tips, commissions, paid leave, dismissal or separation paid during the 8-week period.
  • Maximum per employee is $15,385 over the 8-week period (represents $100,000 annual cost).
  • Employer cost of health insurance, including employer contributions to a self-insured, employer-sponsored group health plan.  Any employee contributions should be excluded.
  • Employer contributions to employee retirement plans, excluding any pre-tax or after-tax contribution by employees.
  • Employer state and local taxes assessed on employee compensation (does not include employee withholdings).
  • Amount paid to owner-employees/self-employed individual/general partners, not to exceed $15,385 per individual.

Full-Time Equivalency (FTE)

Another area with a lot of questions is how to calculate FTE.  The SBA’s guidance is to calculate FTE by dividing the total number of hours paid to an employee each week by 40 hours per week.  A simplified method can be used by assigning 1.0 FTE to employees working 40 hours or more and 0.5 FTE for employees working fewer than 40 hours.

Nonpayroll Adjustments

The following payments are all forgivable expenses if paid within the covered period and agreements were in place prior to February 15, 2020. 

  • Mortgage interest payments for any business mortgage obligation on real or personal property.  Prepayments are not eligible.
  • Business rent or lease payments on real or personal property.
  • Business utility payments (electricity, gas, water, transportation, telephone, or internet).

Costs must be paid during the covered period or incurred during the covered period and paid on or before the next regular billing date, even if the billing date is after the covered period.  Non-payroll costs cannot exceed 25% of the total forgiveness amount.

Potential Forgiveness Adjustments

Within the Paycheck Protection Plan forgiveness calculation, there are a few triggers that might result in a reduction of the forgiveness amount calculated.

The first adjustment relates to a decrease in FTEs.  The borrower’s loan forgiveness may be reduced by the quotient of the average FTE during the covered/alternative payroll period divided by the average FTE during either January 1, 2020 – Feb 29, 2020 or February 15, 2019 – June 30, 2019 (borrower’s preference).  If the result is less than 1, the result will be multiplied by the loan forgiveness to arrive at a modified forgiveness total.  The borrower may qualify for a Safe Harbor exemption if employees were restored by June 30, 2020.  If the reason that employees are not rehired by June 30th are for the following reasons, the borrower will still qualify for Safe Harbor:

  • Borrower made a good-faith, written offer to rehire an employee during the covered period or alternative payroll covered period which was rejected by the employee.
  • Any employees during the covered period or alternative payroll covered period who:
    • Were fired for cause;
    • Voluntarily resigned; or
    • Voluntarily requested and received a reduction of their hours.

The second potential adjustment to the forgiveness amount is triggered if an employee making less than $100,000 annually has a 25% reduction in salary/hourly wage.  To calculate the reduction:

  • Total wages report within the covered period or alternative payroll covered period for each employee / compensation earned January 1, 2020 – March 31, 2020.
  • An employer may qualify for Safe Harbor if the employee’s wages are restored by June 30, 2020.

Lastly as noted above in the nonpayroll adjustment section, nonpayroll adjustments cannot exceed 25% of the total forgiveness calculation.  An adjustment will be made to the forgiveness amount to bring the ratio 75% payroll / 25% nonpayroll.

Documentation to Maintain

  • Support for all employee’s compensation reported.
  • Support for any salary/hourly wage reduction calculations.
  • Documentation regarding any employee job orders and refusals, firing for cause, voluntary resignations, and written requests by any employee for reductions in work schedule.
  • Documentation for support FTE reduction safe harbor.
  • All documentation must be maintained for 6 years after the date the loan is forgiven or repaid in full.
  • Each lender will request additional documentation to support the information within the application such as payroll journals and copies of nonpayroll expenses.

Note within the application there is a checkbox to indicate the borrower has received $2M or more in PPP funding as the sum total of all affiliates.

While the funds received for the PPP are not taxable, the amount of the loan forgiven is also not deductible as an expense.  Borrowers will want to make sure to plan accordingly for their year-end taxes. CironeFriedberg is ready and available to help with any questions you have pertaining to the Paycheck Protection Program as well as any year-end tax planning.


If you need assistance or have any questions on the information in this article, please call your CironeFriedberg professional.  You can reach us by phone at (203) 798-2721 (Bethel), (203) 366-5876 (Shelton), or (203) 359-1100 (Stamford), or email us at

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CironeFriedberg, LLP
CironeFriedberg, LLP
24 Stony Hill Rd, Bethel, CT 06801
(203) 798-2721
6 Research Dr, Suite 450, Shelton, CT 06484
(203) 366-5876
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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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