The recent $669-billion Paycheck Protection Program (PPP) established by the Coronavirus Aid Relief and Economic Security (CARES) Act has been enacted to a chorus of mixed reviews.

The PPP provides loans of up to $10 million per eligible small business to cover payroll costs and other qualifying expenses (such as rent and utilities) to keep small businesses afloat and employees paid until government agencies allow them to reopen. Perhaps best of all, the total amount of each loan used to cover payroll and qualifying expenses may ultimately be forgiven. In other words, the U.S. government won’t require repayment under certain conditions.

Since banks started taking applications for PPP loans, the program has been plagued with controversy — from big businesses getting the lion’s share of the allocated funds to employers having to contend with furloughed and laid off employees who do not see the value in returning to work because they may be able to earn more by remaining on unemployment.

If your company applied for and was approved for a PPP loan, all of this controversy may be water under the bridge. Now your concern is focused on how much of the money you received in the form of a PPP loan will need to be paid back. This post addresses that concern — both for businesses with employees and for self-employed individuals.

Loan Forgiveness for Businesses with Employees

If you own a business and have employees working for you, the amount of your Paycheck Protection Program loan that will be forgiven is said to be equal to the following payments made, and the costs incurred during the eight-week period beginning on the loan origination date (the first disbursement date):

• Payroll costs:
  • Gross salary, wages, commissions, or tips paid to employees (based on an annual wage of up to $100,000 per worker)
  • Vacation, parental, family, medical, or sick leave (excluding any family or sick leave covered under the Families First Coronavirus Response Act and reimbursed through payroll tax credits)
  • Termination allowances
  • Group health care benefits, including insurance premiums
  • Retirement benefit payments
  • State and local payroll taxes
• Mortgage interest on a mortgage taken out by the borrower for real or personal property incurred prior to Feb. 15, 2020 (not including prepayments)
• Rent on a lease taken out before Feb. 15, 2020
• Utilities for service begun before Feb. 15, 2020

The entire amount of the Paycheck Protection Program loan is supposed to be forgiven if you meet all three of the following conditions: Continue reading… Continue reading… Continue reading…