Get the Greatest Benefit From Your PPP Funds

The rules and requirements associated with the Paycheck Protection Program (PPP), administered through the Small Business Administration, have undergone some changes as the program has evolved. If you’ve received these funds, check with your lender or CPA periodically to ensure that you’re in compliance.

June 30th is the deadline to apply if you haven’t already and are eligible. Let’s review the basics.


To be eligible to apply, you must have been in business prior to February 15, 2020 and had employees, not independent contractors, on your payroll. You cannot have a pending application for a loan for these same purposes nor can you have received one since February 15, 2020. Note, however, that previous Small Business Administration (SBA) loans can be refinanced though the PPP program.

Loan Amounts and Details

The maximum loan amount that can be applied for is 2.5 times you average monthly payroll over the last 12 months or $10 million, whichever is less. The availability of credit from other sources does not disqualify you from applying. The specifics of the loan are as follows:

  • The loan requires no collateral and is guaranteed 100% by the SBA.
  • There are no application fees or closing costs.
  • Interest rate is 1%.
  • The loan matures in 24 months.
  • Up to 100% of the loan is forgivable if all requirements are met.

Acceptable Use of PPP Funds/Qualifying Expenses

  • Payroll costs
  • Rent payments on leases that were in place prior to February 15, 2020
  • Mortgage interest
  • Utility payments including gas, electricity, water, telephone, internet access and transportation
  • The costs to maintain your group health insurance plan
  • Interest payments on other business debt that was in place prior to February 15, 2020
  • Costs to refinance an SBA EIDL loan made between January 31, 2020 and April 3, 2020

What Expenses Are Considered Payroll Costs?

  • Gross pay of wages and salaries
  • Tips
  • Group health benefits
  • Vacation pay
  • Sick pay
  • State and local taxes on employee compensation
  • Retirement benefits
  • Severance pay

You cannot include federal employment taxes, workers compensation costs, payroll fees, paid leave under the Families First Coronavirus Response Act (FFCRA), payment to employees living outside the US, or compensation greater than $100K for any individual.


  • An amount equal to qualifying expenses incurred during the 24-month period following the origination of the loan can be forgiven.
  • Up to 100% of the loan amount can be forgiven.
  • No more than 25% of PPP funds applied can be for non-payroll expenses.
  • Amounts that are forgiven are not taxable and are interest free.
  • Loan forgiveness will be reduced in proportion to any reduction in the number of employees during the COVID-19 crisis but this reduction can be avoided if all employees are rehired by June 30, 2020.
  • Loan forgiveness will be reduced, dollar-for-dollar, for reductions in employee compensation, greater than 25% compared to the prior quarter.
  • These provisions exclude employees who are paid more than $100K per year.

How Are Income Taxes Affected?

To provide some cash flow relief, some retroactive changes will allow amending 2018 returns to claim refunds for loss carrybacks of up to five years, increased loss limitation on pass-through businesses, accelerated depreciation for qualifying real property, and refunds of AMT credits. Starting with 2019, increased deductions of business interest are allowed.  As noted earlier, the amount of the loan that is forgiven is not taxable. BUT expenses covered by the PPP loan that would typically be deductible, are not. Be sure to discuss and verify the tax implications with your CPA or tax preparer.

Remember that June 30th is the last day to apply for Payroll Protection Program funds. Check in periodically with your banker or CPA to stay up to date on any changes related to compliance or forgiveness. And be sure to keep thorough and accurate documentation of all expenses you cover with PPP funds. Please feel free to contact me if I can be of help with your application, planning, or accounting for the use of the funds.

Comments for this post are closed.