Download the step-by-step guide to calculate the PPP loan amount for C Corporations, S Corporations and Not-for-Profit Organizations 1. Question: I am self-employed and have no employees, how can I calculate the maximum amount of my PPP loan? (Note that the amount of PPP loan forgiveness depends in part on the total amount spent during the eight-week period following the initial disbursement of the PPP loan.) 13. Limited Safe Harbour with respect to certification of the need to apply for PPP loans. [87] The Small Business Administration (SBA), in consultation with the Treasury, provides these guidelines to help businesses calculate their wage costs to determine the Paycheque Protection Program (RAP) loan amount that businesses can apply. Your salary as an owner is defined by how your business is taxed. If you are taxed as an LLC, your salary is directly related to your business profits and is equal to the amount on which you paid self-employment tax in 2019. If you`re taxed as a business, your salary depends on you for yourself — meaning you`ll have to pay federal and state payroll taxes (if you`re a business owner who pays yourself through sweepstakes, you`re not eligible for the PPP). Contributions must be submitted to justify the amount of PPP loan requested. A payslip or similar document from the payment period covering February 15, 2020 must be provided to prove that you were active and had employees at that time. The CARES Act requires any applicant for a PPP loan to certify in good faith “that the uncertainty of current economic conditions makes the loan application necessary to support the applicant`s ongoing obligations.” The SBA, in consultation with the Ministry of Finance, has issued additional guidance on how it will review the required certification in good faith. See FAQ 46 (as originally published on May 13, 2020).
These guidelines included a safe harbor rule that requires each PPP borrower, as well as its subsidiaries, who have received PPP loans with an initial principal amount of less than $2 million, to provide in good faith the certificate of necessity required for the loan application. Given the additional flexibility given to some borrowers to use their gross income amount, as outlined on line 7 of CIT Form 1040, Schedule C, borrowers who choose to use their gross income to calculate their maximum loan amount will not automatically begin printed page 13153 for a first-run PPP loan and will report more than $150,000 of gross income in Table C. that was used to calculate the borrower`s loan amount. It is assumed that the required certificate of the necessity of the loan application was submitted in good faith. The SBA can verify its certification that “the current economic uncertainty makes this loan application necessary to support the applicant`s ongoing operations”. If the BSO determines that a borrower did not have a sufficient basis for the required certification of the need for the loan application, it may determine that the borrower was not eligible for the loan, loan amount or loan forgiveness. Step 3: Multiply the average monthly net profit or gross income from Step 2 by 2.5. This amount may not exceed $20,833. Mortgage interest payments (but not prepayments or principal payments) for commercial mortgage bonds on real estate or personal property (e.g., interest on your mortgage on the warehouse you purchased to store business equipment, or interest on a car loan on a vehicle you use to run your business), business lease payments (p. e.g., the warehouse where you store the professional equipment or vehicle you use to run your business) and business services (such as the cost of electricity in the warehouse you rent or the gas you use to drive your business car). You must have claimed a deduction for these expenses on your IRS Form 1040, Schedule C for 2019 or 2020 (depending on what you used to calculate the loan amount) or be eligible to claim a deduction for these expenses in order for them to qualify. For example, if you did not claim incidental expenses on your 2019 or 2020 IRS Form 1040, Schedule C, or if you are not eligible to claim them, you cannot use the proceeds for utilities.
For borrowers who have received loans of $150,000 or less that use Form SBA 3508S, the borrower must provide certification and information in accordance with Section 7A(l)(1)(A) of the Small Business Act and, for a PPP Second Draw loan, sales reduction documents if such documents were not provided at the time of application. [68] All other borrowers must provide the certification required under Section 7A(e)(3) of the Small Business Act and (if the borrower has employees) IRS Form 941 and quarterly business and individual payroll forms, as well as unemployment insurance tax forms or equivalent payroll records that best fit the period covered (with proof of group retirement and health, , life, disability, vision and dental insurance contributions). Whether or not the borrower has employees, the borrower must provide proof of business rent, commercial mortgage interest payments on real or personal property, business ancillary benefits, or payments for covered operating expenses, covered costs of property damage, costs covered by suppliers, or covered employee protection expenses during the covered period if the borrower used the loan proceeds at these purposes.