PPP Loan Forgiveness Application – Overview of Required Documentation

By Tricia Meola

On May 15^th, the Small Business Administration released the highly anticipated Paycheck Protection Program Loan Forgiveness Application. The application is lengthy, the calculations are complex, and the instructions aren’t the most straight-forward.

At first (and second) glance, the application process is quite overwhelming!  In order to assist you, we are going to break down the components beginning here with the four main areas of required documentation.

Please note, we have published a video overview walking you through the various parts of the application including the forms listed here in relation to the application process. We also have a video that will show you how to fill out the loan forgiveness application.

1. Information required to complete the PPP Loan Forgiveness Calculation Form:

• Date of disbursement (date the funds were deposited into your bank account – confirm with your bank if you are unsure. View your loan documents.)
• Number of employees at the time of Loan Application
• Number of employees at the time of Forgiveness Application
• Covered Period dates (CP) – this starts on the date of the first loan disbursement
• Alternative Payroll Covered Period (APCP) – you are able to select this date, based on your businesses payroll cycle

2. Information required to complete PPP Schedule A and PPP Schedule A Worksheet

• Payroll costs
  • Separate schedules are required for each of the following categories of employee:
    • Payroll for owners (owner-employees, self-employed individuals, general partners)
    • Payroll for non-owners with payroll costs exceeding $100K
    • Payroll for non-owners with payroll costs less than or equal to $100K

• • The following information is required for each pay period within the time frames specified in the next bullet:
    • Headcount
    • Average number of hours worked during the pay period
    • Average annual salary or hourly wage per pay period
    • Total payroll per pay period
    • Payroll details by employee
      • Employee name
      • Last 4 of employee SSN
      • Cash compensation
      • Average FTE (based on 40 hour work week)
      • Salary/hourly wage reduction
• Applicable periods are as follows:
  • February 15, 2019 – June 30, 2019
  • January 1, 2020 – March 31, 2020
  • February 15, 2020 – this is at a point time, what is the average annual salary or average hourly wage for the employee on this date
  • June 30, 2020 –this is at a point time, what is the average annual salary or average hourly wage for the employee on this date
  • February 15, 2020 – April 26, 2020
• Detail of business mortgage interest payments (do not include prepayments)
  • Copy of lender amortization schedule or cancelled checks supporting eligible payments
• Detail of business rent or lease payments (pursuant to lease agreements in place prior to February 15, 2020)
  • Copy of current lease agreement or cancelled checks confirming payment
• Detail of business utility payments (for business utilities for which service began before February 15, 2020)
  • Copy of invoices from February 2020 through the Covered Period along with cancelled checks or account statements verifying those payments
• Detail of employer contributions for employee health insurance (including employer contributions to a self-insured, employer-sponsored group health plan, but excluding any pre-tax or after-tax contributions by employees)
• Detail of employer contributions to employee retirement plans (excluding any pre-tax or after-tax contributions by employees)
• Detail of employer state and local taxes assessed on employee compensation (state unemployment insurance tax; do not include any taxes withheld from employee earnings)
• If applicable – documentation regarding any employee job offers and refusals, firings for cause, voluntary resignations, and written requests by any employee for reductions in work schedule

3. Documents that Each borrower Must Submit with its PPP Loan Forgiveness Application:

The following documents are required to be submitted to the lender with your PPP loan forgiveness application:

• Payroll: Documentation verifying the eligible cash compensation and non-cash benefit payments from the Covered Period or the Alternative Payroll Covered Period consisting of each of the following:
  • Bank account statements or third-party payroll service provider reports documenting the amount of cash compensation paid to employees;
    
  • Tax forms (or equivalent third-party payroll service provider reports) for the periods that overlap with the Covered Period or the Alternative Payroll Covered Period: i. Payroll tax filings reported, or that will be reported, to the IRS (typically, Form 941); and ii. State quarterly business and individual employee wage reporting and unemployment insurance tax filings reported, or that will be reported, to the relevant state;
  • Payment receipts, cancelled checks, or account statements documenting the amount of any employer contributions to employee health insurance and retirement plans that the Borrower included in the forgiveness amount (PPP Schedule A, lines (6) and (7)).

• Full-Time Equivalents (FTE): Documentation showing (at the election of the Borrower):
  • Average number of FTE employees on payroll per month employed by the Borrower between February 15, 2019 and June 30, 2019;
  • Average number of FTE employees on payroll per month employed by the Borrower between January 1, 2020 and February 29, 2020; or
  • In the case of a seasonal employer, the average number of FTE employees on payroll per month employed by the Borrower between February 15, 2019 and June 30, 2019; between January 1, 2020 and February 29, 2020; or any consecutive twelve week period between May 1, 2019 and September 15, 2019.

The selected time period must be the same time period selected for purposes of completing PPP Schedule A, line 11 (which is either February 15, 2019 to June 30, 2019, or January 1, 2020 to February 29, 2020; in the case of seasonal employers, either of the preceding periods or a consecutive twelve-week period between May 1, 2019 and September 15, 2019). Documents may include:

• • Payroll tax filings reported, or that will be reported, to the IRS (typically, Form 941);
  • state quarterly business and individual employee wage reporting and unemployment insurance tax filings reported, or that will be reported, to the relevant state;
  • Documents submitted may cover periods longer than the specified time period.

• Nonpayroll: Documentation verifying existence of the obligations/services prior to February 15, 2020 and eligible payments from the Covered Period.
  • Business mortgage interest payments: Copy of lender amortization schedule and receipts or cancelled checks verifying eligible payments from the Covered Period; or lender account statements from February 2020 and the months of the Covered Period through one month after the end of the Covered Period verifying interest amounts and eligible payments.
  • Business rent or lease payments: Copy of current lease agreement and receipts or cancelled checks verifying eligible payments from the Covered Period; or lessor account statements from February 2020 and from the Covered Period through one month after the end of the Covered Period verifying eligible payments.
  • Business utility payments: Copy of invoices from February 2020 and those paid during the Covered Period and receipts, cancelled checks, or account statements verifying those eligible payments.
    

4. Documentation that Each Borrower Must Maintain but is Not Required to Submit:

The SBA has indicated borrowers are required to maintain certain information for a period of 6 years, after the date the loan is forgiven or repaid in full. The SBA has also indicated borrowers are required to permit authorized representatives of SBA, including representatives of its Office of Inspector General (OIG), to access such files upon request.

• PPP Schedule A Worksheet or its equivalent and the following:
  • Documentation supporting the listing of each individual employee in PPP Schedule A Worksheet Table 1, including the “Salary/Hourly Wage Reduction” calculation, if necessary.
  • Documentation supporting the listing of each individual employee in PPP Schedule A Worksheet Table 2; specifically, that each listed employee received during any single pay period in 2019 compensation at an annualized rate of more than $100,000.
  • Documentation regarding any employee job offers and refusals, firings for cause, voluntary resignations, and written requests by any employee for reductions in work schedule.
  • Documentation supporting the PPP Schedule A Worksheet “FTE Reduction Safe Harbor.”