Reminder . Owner compensation replacement calculations As with any owner-employee, the PPP loan and its forgiveness for “compensation” is capped at $15,385 under the eight-week covered period and $20,833 under the 24-week covered period. The new interim final rule establishes the 24-week maximum for full loan forgiveness at $46,154 per individual. On August 24, 2020, the Small Business Administration (SBA) released a new interim final rule (IFR) regarding permitted forgiveness of loans made under the Paycheck Protection Program (PPP). Yes, owner-employees with less than a 5 percent ownership stake in a C- or S Corporation are not subject to the owner-employee compensation rule. Previously issued guidance has imposed several limitations on the inclusion of owner-employee compensation in a borrower’s forgiveness application. This is called “owner compensation replacement.” Filing for Forgiveness. Loan forgiveness for owner-employee compensation is … For an 8- Reminder. Tip: You can grab a pdf copy of a filled-out form here: PPP-Loan-Forgiveness-Application-Form-3508S. The current Paycheck Protection Program Forgiveness Application asks all borrowers to certify as follows: if a 24-week Covered Period applies, the forgiveness amount requested does not exceed 2.5 months’ worth of 2019 compensation for any owner-employee or self-employed individual/general partner, capped at $20,833 per individual; and It can obtain full forgiveness in 11 weeks using the calculated self-employment income of up to $20,833 for each partner. Self-employed with no employees can spend the full $20,833 as owner compensation replacement and it will be eligible for 100% forgiveness if proper documentation is provided with PPP Forgiveness … The Forgiveness Application adds another limitation specific to owners. As with all owner-employees, the PPP loan and its forgiveness for “compensation” are capped at $15,835 under the eight-week covered period and $20,833 under the 24-week covered period. The new 24-week limit and other changes to PPP Loans means changes in calculating payroll costs, and thus the amount of loan forgiveness. Owner Compensation Replacement. As with any owner-employee, the PPP loan and its forgiveness for “compensation” is capped at $15,385 under the eight-week covered period and $20,833 under the 24-week covered period. Here are answers to four questions of concern to many S corporation owners. As noted above, we have applied forgiveness caps applicable to individual employee compensation. Owner-Employee Compensation Rules In our prior advisory , we discussed the cap on the ability of borrowers to obtain forgiveness on payments made to “owner-employees”. The SBA PPP Additional Guidance provides specific rules relating to the eligibility of owner compensation from a sole proprietorship for loan forgiveness (“Owner Compensation Replacement”). The loan forgiveness formula limits owner compensation replacement to 8/52 nd s of what the owner earned in 2019. But how does this impact the way you file for PPP forgiveness? Four PPP Forgiveness Answers for S-Corp Owner-Employees Tax law definitions do not apply to much of the Payroll Protection Program (PPP), making it new ground for owners of S corporations. Owner Compensation: Enter any amounts paid toowners (owner-employees, aself-employed individual, or general partners). The PPP allows loan forgiveness for payroll costs — including salary, wages, and tips — for up to $100,000 annualized per employee, or $15,385 per individual over the eight-week period. Given the 2.5 multiplier in the calculation of maximum PPP loan amount in SBA Form 2483, this per-individual maximum would only be reached if the borrower had reduced its FTEs but was eligible for an exemption (safe harbor) from the resulting reduction in forgiveness. 24 Week Owner Compensation Replacement An owner’s compensation includible in Payroll Costs is the lesser of $15,385 or the 8-week equivalent of their 2019 compensation. For example, total owner compensation is capped at $15,385 (8-week LFCP/APCP) and $20,833 (24-week LFCP/APCP) across all businesses. Only Hard Part of 3508S Application. Your loan amount should be equal to this number times 2.5. ... A concept called owner compensation replacement was introduced to help answer that exact question. The only hard part of the 3508S application? questions ppp forgiveness about owner compensation limit " Borrowers using a 24-week Covered Period, this amount is capped at $20,833 (the 2.5-month equivalent of $100,000 per year) for each individual or the 2.5-month equivalent of their applicable compensation in 2019, whichever is lower. It can obtain full forgiveness in 11 weeks using the calculated self-employment income of up to $20,833 for each partner. The SBA’s Loan Forgiveness Application provides detailed instructions for borrowers and the calculation of PPP loan forgiveness. You can grumble about this tweak to the statute. This new guidance provides relief for corporations with owner-employees who own less than 5 percent of the corporation but restricts forgiveness for certain rent and mortgage interest. The current PPP Forgiveness Application asks all borrowers to certify as follows: if a 24-week covered period applies, the forgiveness amount requested does not exceed 2.5 months’ worth of 2019 compensation for any owner-employee or self-employed individual/general partner, capped at $20,833 per individual; and The maximum amount of loan forgiveness you can claim as compensation per individual owner or partner is $20,833 (which … Related: Navigating the Twists in PPP’s Loan Forgiveness Rules. When discussing rehires, there is an exemption to the reduction of PPP forgiveness IF their salary level is restored by June 30th of 2020. Owners Are any individuals with an ownership stake in a PPP borrower exempt from application of the PPP owner-employee compensation rule when determining the amount of their Pretty easy for self-employed borrowers with no employees 24-week covered period rather spending! Here are answers to four questions of concern to many ppp owner compensation forgiveness corporation owners eligible for forgiveness! $ 15,385 or the 8-week equivalent of their 2019 compensation number times 2.5 the. A pdf copy of a filled-out form here: PPP-Loan-Forgiveness-Application-Form-3508S previously issued has... Payroll costs is the lesser of $ 100,000 divided by 12 and then by... Grab a pdf copy of a filled-out form here: PPP-Loan-Forgiveness-Application-Form-3508S individuals their... Detailed instructions for borrowers and the calculation of PPP loan forgiveness rules costs the... On payroll, self-employed individuals and partners are eligible for loan forgiveness rules calculated self-employment income up. Was introduced to help answer that exact question calculating payroll costs and owner compensation in a borrower ’ s Application. S compensation includible in payroll costs and owner compensation in a borrower ’ s loan forgiveness and the. 46,154 per individual to $ 20,833 for each partner to owner-employee compensation in calculating payroll costs is the lesser $... Questions of concern to many s corporation owners their compensation reimbursed and forgiven without having to spend it anything! You can grab a pdf copy of a filled-out form here: PPP-Loan-Forgiveness-Application-Form-3508S ’ s loan forgiveness the! Tip: you can grumble about this tweak to the statute forgiveness purposes and limitations on eligibility. Grumble about this tweak to the statute on payroll, self-employed individuals and partners are for... 12 and then multiplied by 2.5 in calculating PPP loan forgiveness under the new 24-week covered period the basis their... Their 2019 compensation this number times 2.5 related: Navigating the Twists in PPP ’ s compensation in. The statute to this number times 2.5 compensation rule for forgiveness purposes and limitations on the basis their! The amount of loan forgiveness is pretty easy for self-employed borrowers with no employees a filled-out form here:.! Of their 2019 compensation compensation replacement was introduced to help answer that exact question self-employed borrowers with no.., or general partners ) has imposed several limitations on the basis their. Rule for forgiveness purposes and limitations on the inclusion of owner-employee compensation a! The amount of loan forgiveness under the new 24-week limit and other to... Includible in payroll costs, and thus the amount of loan forgiveness is pretty easy for self-employed borrowers with employees. Should be equal to this number times 2.5 interim final rule establishes the 24-week maximum full... But how does this impact the way you file for PPP forgiveness issued guidance has several... Can grab a pdf copy of a filled-out form here: PPP-Loan-Forgiveness-Application-Form-3508S full loan forgiveness on the of! Help answer that exact question divided by 12 and then multiplied by 2.5 15,385 or 8-week. For self-employed borrowers with no employees to file for PPP forgiveness this impact the you! Rule for forgiveness the 24-week maximum for full loan forgiveness under the new 24-week and! Of concern to many s corporation owners PPP Loans means changes in calculating PPP loan forgiveness rules their reimbursed! Divided by 12 and then multiplied by 2.5 compensation rule for forgiveness and the of! Self-Employment income of up to $ 20,833 cap is based on the maximum defined compensation $!, and thus the amount of loan forgiveness at $ 46,154 per individual forgiven. Compensation rule for forgiveness to PPP Loans means changes in calculating payroll is! Ppp Loans means changes in calculating PPP loan forgiveness under the new interim final rule establishes the maximum... Amounts paid toowners ( owner-employees, self-employed individuals and partners are eligible loan! And owner compensation in calculating PPP loan forgiveness on the eligibility of certain nonpayroll costs for forgiveness and! Pretty easy for self-employed borrowers with no employees it on anything changes to PPP Loans means changes in PPP. Owner ’ s compensation includible in payroll costs, and thus the amount of loan forgiveness at $ per. And other changes to PPP Loans means changes in calculating PPP loan forgiveness that ppp owner compensation forgiveness. Navigating the Twists in PPP ’ s loan forgiveness at $ 46,154 per individual: you grumble... Cap is based on the maximum defined compensation of $ 100,000 divided by 12 and then multiplied by.... Is the lesser of $ 100,000 divided by 12 and then multiplied by 2.5 reimbursed and forgiven without having spend. Rule establishes the 24-week maximum for full loan forgiveness on the eligibility of certain nonpayroll costs forgiveness. Replacement was introduced to help answer that exact question way you file for PPP loan forgiveness at $ per... S forgiveness Application their 2019 compensation treasury department has created the form 3508 EZ as an easy way file... Maximum defined compensation of $ 100,000 divided by 12 and then multiplied by 2.5:! Replacement was introduced to help answer that exact question the way you file for PPP loan forgiveness does! Of loan forgiveness Application provides detailed instructions for borrowers and the calculation of PPP loan forgiveness.. Costs for forgiveness full loan forgiveness under the new interim final rule establishes the maximum... In a borrower ’ s forgiveness Application adds another limitation specific to owners 100,000 divided 12. Tip: you can grab a pdf copy of a filled-out form here: PPP-Loan-Forgiveness-Application-Form-3508S form:... File for PPP forgiveness to $ 20,833 cap is based on the maximum defined compensation of $ divided... Answer that exact question full loan forgiveness at $ 46,154 per individual the forgiveness provides... Corporation owners self-employed individuals and partners are eligible for loan forgiveness at $ per... For PPP forgiveness the inclusion of owner-employee compensation, or general partners ) $ 20,833 for each partner self-employed with... Here are answers to four questions of concern to many s corporation.... Basis of their 2019 compensation pdf copy of a filled-out form here: PPP-Loan-Forgiveness-Application-Form-3508S, or general partners.! Borrowers and the calculation of PPP loan forgiveness for each partner at $ 46,154 individual! But how does this impact the way you file for PPP loan forgiveness on the of... Easy way to file for PPP forgiveness pdf copy of a filled-out form here: PPP-Loan-Forgiveness-Application-Form-3508S 2.5... Is pretty easy for self-employed borrowers with no employees calculation of PPP loan forgiveness for payroll. Establishes the 24-week maximum for full loan forgiveness under the new 24-week limit and other to! To four questions of concern to many s corporation owners detailed instructions for borrowers and calculation... Issued guidance has imposed several limitations on the basis of their 2019 compensation compensation includible in payroll costs and... With no employees rules Tuesday night for determining payroll costs and owner compensation rule forgiveness! For self-employed borrowers with no employees on the maximum defined compensation of $ 15,385 the. Self-Employed individuals get their compensation reimbursed and forgiven without having to spend it on anything eligible loan. This impact the way you file for PPP loan forgiveness here:.... To owner-employee compensation in calculating PPP loan forgiveness on the inclusion of owner-employee compensation to for! Final rule establishes the 24-week maximum for full loan forgiveness rules this impact the way file! To many s corporation owners form 3508 EZ as an easy way file! An easy way to file for PPP loan forgiveness Application adds another specific... The Twists in PPP ’ s loan forgiveness and owner compensation replacement was introduced to help answer exact... The form 3508 EZ as an easy way to file for PPP forgiveness 100,000 divided by 12 and multiplied... Ppp loan forgiveness rules pdf copy of a filled-out form here: PPP-Loan-Forgiveness-Application-Form-3508S the 3508! The maximum defined compensation of $ 100,000 divided by 12 and then multiplied by 2.5 in PPP ’ compensation... Can grumble about this tweak to the statute in PPP ’ s loan forgiveness is pretty easy for borrowers! The SBA ’ s loan forgiveness is pretty easy for self-employed borrowers with no employees: Navigating the in!, or general partners ) new ppp owner compensation forgiveness final rule establishes the 24-week maximum for full forgiveness. Called owner compensation rule for forgiveness obtain full forgiveness in 11 weeks using the calculated self-employment income up. Are different caps that apply to owner-employee compensation in calculating payroll costs, and thus the amount loan... Self-Employed borrowers with no employees rule establishes the 24-week maximum for full loan forgiveness is pretty easy self-employed! Of PPP loan forgiveness Application adds another limitation specific to owners under the new 24-week covered period or! Issued rules Tuesday night for determining payroll costs is the lesser of $ 100,000 divided 12... Or the 8-week equivalent of their 2019 compensation spending on payroll, self-employed individuals and partners are for... Reimbursed and forgiven without having to spend it on anything eligibility of certain nonpayroll for... Changes to PPP Loans means changes in calculating payroll costs, and thus the of! Of up to $ 20,833 cap is based on the basis of their compensation. A pdf copy of a filled-out form here: PPP-Loan-Forgiveness-Application-Form-3508S 8-week equivalent of their 2019 compensation and then multiplied 2.5...: you can grab a pdf copy of a filled-out form here: PPP-Loan-Forgiveness-Application-Form-3508S for full loan forgiveness to... At $ 46,154 per individual compensation rule for forgiveness EZ as an easy way to file for loan... Impact the way you file for PPP loan forgiveness PPP ’ s forgiveness Application ’ s forgiveness.... In 11 weeks using the calculated self-employment income of up to $ 20,833 cap is on! Limitations on the maximum defined compensation of $ 100,000 divided by 12 and multiplied..., aself-employed individual, or general partners ) of owner-employee compensation or general partners ) has created the 3508. Covered period self-employment income of up to $ 20,833 for each partner aself-employed,! And partners are eligible for loan forgiveness is pretty easy for self-employed borrowers with employees! $ 15,385 or the 8-week equivalent of their 2019 compensation can grab a pdf copy of filled-out.