May 13, 2020

Paycheck Protection Program Loan Forgiveness Checklist

The Paycheck Protection Program loan forgiveness depends on two main factors:

Spending the PPP funds on the allowable things
Tracking and proving your spending

To that end, WendroffCPA has created a simple checklist you can use to ensure you’re following the correct guidelines to maximize your loan forgiveness.

Step One: Spend your PPP Funds on the Right Things

Spend at least 75% of the PPP funds on the following payroll costs:

Salaries
Wages
Vacation Pay
Parental and Family Leave
Medical Benefits
Sick Leave
Other Health Benifits

Spend the remaining 25% of the PPP funds on these approved expenses:*

Mortgage Interest
Rent
Utilities
IMPORTANT: In order for the mortgage interest, rent and utility expenses to be forgivable, they cannot be brand new, meaning they had to had been in effect prior to February 15, 2020.

Step Two: Track your Expenses

It’s critical to track your expenses correctly to prove them and qualify for forgiveness. We recommend this 6-step process:

Record the PPP deposit as a loan on your books
Over the next 8 weeks complete bookkeeping on all financial transactions
- Record the expense amounts
- Record the vendor/payee
- Record the category of the expense (Utilities, rent, payroll, etc)
- Record the date of the transaction
- Store the receipt or official record (such as payroll records)
At the end of the 8 weeks, add up the total amount spent on forgivable categories
Apply for forgiveness through your lender
Once the amount of forgiveness has been confirmed by your lender, adjust the amount out of the “Loan” section of your bookkeeping into a “Non-Taxable Gain.”
If you did not get full forgiveness of the loan, any remaining amount will stay in the loan category of your bookkeeping.

The Paycheck Protection Program Forgiveness and Self Employed People

If you’re self-employed, you still qualify for the PPP even if you don’t have employees. The difference is that your’e given a PPP loan based on the 2019 net profit, not 2019 payroll records. So you don’t need to spend 75% of the loan on payroll. Instead eight weeks worth of your 2019 net profit can automatically be forgiven, being treated as a replacement for profit. For the remainder of your funds, you will need to follow the above checklist.

Please keep in mind that the treasury is still updating guidance, and we will update this checklist accordingly.

If you have any questions at all related to the PPP loan or accounting/taxes in general, please contact us through the Free Quote button or email our director of communications Darren Wendroff at darren@wendroffcpa.com.

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