Key updates / changes to the new application are as follows:
1. Borrowers can complete an E-Z Form if they meet one of the following:
• Self-employed with no employees
2. The FTE & Wage Reduction Safe Harbors – if the average FTE (for FTE safe harbor calculation) or the average wages (for wage reduction safe harbor calculation) between 2/15/20 – 4/26/20 are MORE than the FTE or Wages at 2-15-20, safe harbor to restore FTEs/wages does NOT apply.
3. The safe harbor for FTE/wages can be met the EARLIER of 12/31 or the date they apply for forgiveness. So, if businesses meet the FTE requirements earlier than 12/31, they do not have to wait until 12/31 to apply. They do, however, have to wait until after the covered period (either 8 or 24 weeks) to apply.
4. It appears that if the 24 week period is used for forgivable costs, the cost will far exceed the loan amount, which means that even if the business had an FTE or wage reduction, the entire loan amount can still be forgiven. For example, costs over the 24 weeks may be twice as much as the loan amount, so even if the business reduced FTEs by 50%, the entire loan amount can still be forgiven.
5. Owners are limited to 2.5 months of payroll if using the 24 week period (which is $20,833 over the 24 weeks) – 2.5/12 * $100,000.
6. Self-employed people (Schedule C’s) get 2.5 months of their Schedule C profit,which is what the loan was based off. So, if there were no other employees, the entire loan amount will be automatically forgiven.
7. Businesses cannot separately include health insurance paid for owners in addition to their compensation.
8. Businesses can include 401k contributions for S-Corp owners in addition to owner’s compensation (but not for partners in a partnership).
For payroll paid during the covered period is it based on the date paid or is it based on when the payroll was incurred? Is there a limit on how much an employee can make compared to the most recent quarter if it is not in excess of $100,000 on an annual basis? Is rent, utilities, interest, etc. in arrears eligible for forgiveness if paid during the covered period? What about amounts paid in advance? For employees laid off prior to 4/27 and hired back by 6/30 is there a time period they must remain employed in order to avoid a reduction in loan forgiveness? How do you define FTE? Is it 30, 35 or 40 hours? We know non-mortgage interest is a covered cost, but is it also eligible for forgiveness? How do you measure the 25% reduction amount for payroll? For example, from 1/1/20 to 3/31/20, do you look at number of hours, rate per hour, or just total compensation during that period? If you bonused people during Q1 of 2020 that is not a part of their normal compensation, is that included when looking at the 25% reduction for payroll? What is “transportation” with regards to being a utility? Does this include mileage, gas for vehicles, etc.? Does “rent” include all leases (building, vehicle, equipment, copiers)? If not, what does it include? If a business hires new employees after 2/15/20, can they be included in the FTE count for the 8-week period? Are there any restrictions on compensation (increases) for related parties (mother, father, brother, sister, child, etc.)?
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