SBA PPP and EIDL Small Business Loans (some money is forgivable)

[cgr]

Looks like the forgiveness app is available: https://home.treasury.gov/system/files/136/3245-0407-SBA-Form-3508-PPP-Forgiveness-Application.pdf

I'm a S-Corp law firm who only employs myself. I received a $20,800 loan. It looks like I can only get forgiveness for paying myself $15,835 per week.

Can I hire my wife and pay her a salary and have that amount be forgiven? I don't see why not?

POSSIBLE WORK AROUND FOR SE INDIVIDUAL WITH NO NON-PAYROLL EXPENSES WHO ARE LIMITED TO 73.85% FORGIVENESS. HIRE YOUR WIFE AS AN ADDITIONAL EMPLOYEE FOR YOUR BUSINESS AND PAY HER THE OTHER 26.15% IN PAYROLL COSTS. (could be you will need to file it with payroll taxes)

I like this idea though I want to have another go at those rules to verify.

The only drawback is that if you have no payroll previously- I'm assuming most Schedule C's don't (I actually heard of a few that have Schedule C and payroll, but only got approval for the payroll portion), you'd need to set up a payroll, file 941's, set  up a disability tax account, a UI tax account, etc etc all for 5k or less... but again, this is dansdeals...

I didn't have a chance yet to read through the rules again...

[jackofall]

Anybody saw the forgiveness application in Excel yet?
Thanks!

?

[LAX_Esq]

I'm a legit S-Corp and already have payroll software set up and file 941's, etc. (as opposed to a self-employed guy who files a Schedule C). Adding my wife to the payroll would be easy.

The rules say nothing that my wife has to have been employed last year. I read that PDF carefully

[cgr]

The rules say nothing that my wife has to have been employed last year. I read that PDF carefully

I'm referring to this set of interm rules where the 8/52 forgiveness is discussed- and if it's limited to that and just that, or additional payroll is allowed.
https://www.govinfo.gov/content/pkg/FR-2020-04-20/pdf/2020-08257.pdf

[LAX_Esq]

I'm referring to this set of interm rules where the 8/52 forgiveness is discussed- and if it's limited to that and just that, or additional payroll is allowed.
https://www.govinfo.gov/content/pkg/FR-2020-04-20/pdf/2020-08257.pdf

I see what you're pondering. I've read that document several times, and I don't see where it would require that your forgiveness is based on the same employees who were the basis for your PPP qualification. Or where it would say your forgiveness can't be based on having MORE employees than the number who were the basis for your application.

Just as a hypo, if you employed 5 employees in 2019 and qualified for a PPP loan based on those employees... and you fired all five of them... you could hire back 5 totally different employees and pay them during the 8 week period and use that as the payroll cost for your forgiveness application. It makes no difference that they're not the original 5 employees, and all that matters is you have at least the same number of employees (5 vs 5). Am I right?

[TBD]

I see what you're pondering. I've read that document several times, and I don't see where it would require that your forgiveness is based on the same employees who were the basis for your PPP qualification. Or where it would say your forgiveness can't be based on having MORE employees than the number who were the basis for your application.

Just as a hypo, if you employed 5 employees in 2019 and qualified for a PPP loan based on those employees... and you fired all five of them... you could hire back 5 totally different employees and pay them during the 8 week period and use that as the payroll cost for your forgiveness application. It makes no difference that they're not the original 5 employees, and all that matters is you have at least the same number of employees (5 vs 5). Am I right?

+1

[cgr]

I see what you're pondering. I've read that document several times, and I don't see where it would require that your forgiveness is based on the same employees who were the basis for your PPP qualification. Or where it would say your forgiveness can't be based on having MORE employees than the number who were the basis for your application.

Just reread. Looks like it should be possible but I do have a slight concern because of how the SBA could choose to interpret...

Here's the language:

The Administrator, in consultation with the Secretary, has determined that it is appropriate to limit the forgiveness of owner compensation replacement for individuals with self-employment income who file a Schedule C to eight weeks’ worth (8/52) of 2019 net profit.

My concern is that in the next set of interim rules they'll tell you that what they meant by the 8/52 limit for "individuals with self-employment income who file a Schedule C" is that that's all they're entitled to in terms of payroll.

As a side note if the wife is listed as a member/partner this schtick definitely won't work as she's part of the 8/52 owner limits as well.

[LAX_Esq]

Just reread. Looks like it should be possible but I do have a slight concern because of how the SBA could choose to interpret...

Here's the language:
My concern is that in the next set of interim rules they'll tell you that what they meant by the 8/52 limit for "individuals with self-employment income who file a Schedule C" is that that's all they're entitled to in terms of payroll.

As a side note if the wife is listed as a member/partner this schtick definitely won't work as she's part of the 8/52 owner limits as well.

This would only apply to Schedule C filers, right. If the wife gets a W-2, she's clearly payroll / salaried -- and not an owner.

[TBD]

Just reread. Looks like it should be possible but I do have a slight concern because of how the SBA could choose to interpret...

Here's the language:
My concern is that in the next set of interim rules they'll tell you that what they meant by the 8/52 limit for "individuals with self-employment income who file a Schedule C" is that that's all they're entitled to in terms of payroll.

As a side note if the wife is listed as a member/partner this schtick definitely won't work as she's part of the 8/52 owner limits as well.

d. How can PPP loans be used by
individuals with income from selfemployment who file a 2019 Form 1040,
Schedule C?
The proceeds of a PPP loan are to be
used for the following.
i. Owner compensation replacement,
calculated based on 2019 net profit as
described in Paragraph 1.b. above.
ii. Employee payroll costs (as defined
in the First PPP Interim Final Rule) for
employees whose principal place of
residence is in the United States, if you
have employees.
 

[beeweegee]

This was just released yesterday:
https://home.treasury.gov/system/files/136/Interim-Final-Rule-on-Loan-Increases.pdf

Some PPP loans were approved to partnerships or seasonal employers before the additional guidance was issued and, as a result, those businesses may not have received PPP loans in the maximum amount for which they are eligible. This interim final rule authorizes all PPP lenders to increase existing PPP loans to partnerships or seasonal employers to include appropriate amounts to cover partner compensation in accordance with the interim final rule posted on April 14, 2020

While the above may not fall into the category of partnerships or seasonal employers, the banks now have guidance on how to increase loans to those that didn't receive as much as they are entitled to. If this is you I suggest you reach out to see what they say.

I just got off the phone with Kabbage - the rep was not aware of this, nor were two supervisors she reached out to. She asked me to email her the link (which I did), and she said they will look into it - but as of now, Kabbage is not set up to be able to make any changes to a loan one funds have been disbursed.

[TBD]

I just got off the phone with Kabbage - the rep was not aware of this, nor were two supervisors she reached out to. She asked me to email her the link (which I did), and she said they will look into it - but as of now, Kabbage is not set up to be able to make any changes to a loan one funds have been disbursed.

The problem is that Kabbage is not the lender, therefore they will have to go back to the bank who gave the loan

[beeweegee]

The problem is that Kabbage is not the lender, therefore they will have to go back to the bank who gave the loan

Right. I want to see if I can go back and adjust the amount of my loan, but while I wait on them to get back to me, I also want to start cutting checks with the funds I already have...

[cgr]

This would only apply to Schedule C filers, right. If the wife gets a W-2, she's clearly payroll / salaried -- and not an owner.

No- an owner can be on payroll as well, and their compensation would go on line 9 and be limited to 8/52 regardless if it was paid via payroll or direct check.

[cgr]

No- an owner can be on payroll as well, and their compensation would go on line 9 and be limited to 8/52 regardless if it was paid via payroll or direct check.

Does this mean that an owner with 5 payroll employees including himself, with a loss on his Schedule C will receive $0 forgivable for his 8/52 and only receive forgiveness for the other 4 employees?

[LAX_Esq]

No- an owner can be on payroll as well, and their compensation would go on line 9 and be limited to 8/52 regardless if it was paid via payroll or direct check.

It's not clear how line 9 applies to corps (e.g., S-Corps) and what is an "owner-employee." If I'm the sole-shareholder of an S-corp and I pay myself a salary, does that $13,835 go on line 1 or line 9? It's not so clear. Does it even matter? I don't see why it matters, actually.

Either way, why cant I pay my wife the rest of the amount to make up the difference? Seems like I can.

[TBD]

Does this mean that an owner with 5 payroll employees including himself, with a loss on his Schedule C will receive $0 forgivable for his 8/52 and only receive forgiveness for the other 4 employees?

If there was a loss on Schedule C than to begin with you didnt receive any loan amount for the owner only for the employees.

[TBD]

It's not clear how line 9 applies to corps (e.g., S-Corps) and what is an "owner-employee." If I'm the sole-shareholder of an S-corp and I pay myself a salary, does that $13,835 go on line 1 or line 9? It's not so clear. Does it even matter? I don't see why it matters, actually.

Either way, why cant I pay my wife the rest of the amount to make up the difference? Seems like I can.

It matters a lot. If you can include benefits paid for the owner. However it seems that needs to be entered only on Line 9

[cgr]

It's not clear how line 9 applies to corps (e.g., S-Corps) and what is an "owner-employee." If I'm the sole-shareholder of an S-corp and I pay myself a salary, does that $13,835 go on line 1 or line 9? It's not so clear. Does it even matter? I don't see why it matters, actually.

Instructions seem clear enough... Employee’s Name: Separately list each employee. Do not include any independent contractors, owner-employees, self-employed individuals, or partners.

It matters to them because of the 8/52 limit, and the limitation that owner's not include SALT, health benefits, and retirement in forgiveness...

[cgr]

If there was a loss on Schedule C than to begin with you didnt receive any loan amount for the owner only for the employees.

You didn't have to provide Schedule C- you could have just given W3 which doesn't differentiate between owner and employee...you would have received 2.5X payroll regardless of who it was paying.

[TBD]

You didn't have to provide Schedule C- you could have just given W3 which doesn't differentiate between owner and employee...you would have received 2.5X payroll regardless of who it was paying.

If the owner received W-2 Income he should be eligible even if the Schedule C showed a loss.


Line 9: Enter any amounts paid to owners (owner-employees, a self-employed individual, or general partners). This
amount is capped at $15,385 (the eight-week equivalent of $100,000 per year) for each individual or the eight-week
equivalent of their applicable compensation in 2019, whichever is lower.


orgiveness amount on the PPP loan.
The Administrator, in consultation
with the Secretary, determined that it is
appropriate to limit self-employed
individuals’ (who file a Form 1040
Schedule C) use of loan proceeds to
those types of allowable uses for which
the borrower made expenditures in
2019. The Administrator has
determined that this limitation on selfemployed individuals who file a Form
1040 Schedule C is consistent with the
borrower certification required by the
Act;