Doug Houser and Paul McEwan of the SBA & PPP Loan Task Force at Rea & Associates are back and, with the official release of the Paycheck Protection Program (PPP) Loan Forgiveness Application by the Small Business Administration, are ready to present a special 90-minute, interactive webcast that will help you make sense of the application while providing much-needed clarity on a variety of factors pertaining to PPP Loans. Be sure to join Doug and Paul as they walk attendees through the formal application and attempt to explain the various complexities found within this document. Specifically, during this presentation, you will hear: - Discussion about the most recent official guidance of the PPP Loan and how to navigate PPP Forgiveness. - A complete review of the PPP Forgiveness Application. - About PPP Forgiveness Application's Critical Issues/FAQ’s. - How to protect your business through risk mitigation and building a file.

2. Loan Forgiveness Application
Safe harbor date to return PPP loan funds was May 18
On May 15, 2020 - PPP loan forgiveness application and
instructions released.
Provides more guidance on several key issues regarding
forgiveness.
On May 22: More guidance released
 Interim Final Rule on Loan Forgiveness
 Interim Final Rule on SBA Loan Review Procedures
 Not all the answers we had hoped for – no deadline for
application yet

3. Loan Forgiveness Application
Proposed Legislation expected:
Within 2-3 weeks
Extension of eight-week measurement period
Relaxation of 75% payroll cost requirement
Deductibility of forgiveness related costs

4. Loan Forgiveness Application
Documentation Requirements
“The borrower shall not receive forgiveness without
submitting all required documentation to the lender.”
“If the lender identifies errors in the borrower’s
calculation or material lack of substantiation in the
borrower’s supporting documents, the lender should
work with the borrower to remedy the issue.”
All Borrowers must submit to their lender:
PPP Loan Forgiveness Calculation
PPP Schedule A

5. First Poll Question
What level of support would you like from your trusted
advisor to prepare your forgiveness application?
 Not much, I’m certain I can handle it.
 I will need some hand holding from my trusted advisor, but I’m
confident with a little support, I can get through this.
 I am not confident at all about this, but I intend to try. With a
lot of hand holding from my trusted advisor, I think I can get it
done.
 I want nothing to do with this. I would love to be able to
outsource this project to my trusted advisor just like my
annual tax preparation work.

6. Documentation Requirements
Payroll – Documentation for the covered period,
including:
Bank statements and third-party payroll reports
Payroll tax forms
• Typically Form 941 and state wage reporting forms
• Payment receipts, cancelled checks, or account
statements for:
– Employee health insurance and
– Retirement plans

7. Documentation Requirements
FTE documentation showing:
 Average number of FTE on payroll per month from 2/15/2019
and 6/30/2019 or
 Average number of FTE on payroll per month from 1/1/2020
and 2/29/2020 or
 For seasonal employers, any consecutive twelve-week period
between May 1, 2019 and September 15, 2019

8. Documentation Requirements
Non-payroll: Documentation verifying existence of
 Obligations/services prior to February 15, 2020 and
 Eligible payments from the Covered Period
Business mortgage interest payments
Business rent or lease payments
Business utility payments

9. Documentation Requirements
Not required to submit with application, but must have:
 PPP Schedule A Worksheet or its equivalent and the following:
 PPP Schedule A Worksheet Table 1, including the “Salary/Hourly
Wage Reduction” calculation, if necessary.
 PPP Schedule A Worksheet Table 2; specifically, that each listed
employee received during any single pay period in 2019
compensation at an annualized rate of more than $100,000.
 Documentation regarding any employee job offers and refusals,
firings for cause, voluntary resignations, and written requests by any
employee for reductions in work schedule.
 Documentation supporting the PPP Schedule A Worksheet “FTE
Reduction Safe Harbor.”

10. Documentation Requirements
Other required documentation:
 documentation submitted with its PPP loan application,
 documentation supporting the Borrower’s certifications as to the
necessity of the loan request and its eligibility for a PPP loan, and
 documentation demonstrating the Borrower’s material compliance
with PPP requirements.
Revenues, expenses, cash flow/liquidity, A/R, A/P, suppliers,
contract changes, etc.
Rolling cash flow, downside budget
Meeting minutes, memos to file, e-mails
Must retain all such documentation for six years after the date
the loan is forgiven or repaid in full

11. Second Poll Question
Are you still anxious or concerned about the “necessity”
certification when you applied for the loan? (“[c]urrent
economic uncertainty makes this loan request necessary
to support the ongoing operations of the Applicant.”)
 Yes
 No

12. Covered Period
Two choices for payroll costs only:
 8 weeks (56 days) from the date your loan is received
(regardless of what time of day you receive the loan)
 Alternative Covered Period
• 8-week (56-day) period beginning on the first day of borrower’s first
payroll period after the date borrower received PPP loan funds
• Allows your eight-week measurement period to mirror your closest
payroll cycle – easier to document
• Only available if your payroll cycle is bi-weekly or more frequent
 Your decision impacts your FTE and compensation reduction
calculations also

13. Basis of Accounting
Costs paid during the eight-week period OR
Costs incurred during the eight-week period and paid at
the next pay date or invoice date for non-payroll costs
 Clarified in latest Interim Final Rule
Example: Retirement benefits
 2019 profit sharing contribution/deposit
 Includable if paid during eight-week period
 Wait until end of your eight-week period in case we get
specific guidance that limits this

14. Where to Start?
Start with Schedule A Worksheet
Get your employee census organized
 Those that made less than $100,000 annualized for any pay during
2019 or new employees in 2020
 Those that made more than $100,000 annualized for any pay during
2019
 Determine which period you plan to use – eight-week period starting
with loan disbursement or Alternative Payroll Covered Period
 Determine your reference period; need to do the FTE calculation for
this period also
Cash compensation may include bonus or hazard pay, but
may not exceed $15,385 – IFR, 5/22

15. Third Poll Question
Have you considered paying one-time bonuses or
making a 2019 discretionary profit sharing contribution
during your eight-week period?
 Yes
 No

16. Schedule A Worksheet
How to calculate FTE
 Use 40 hour week
 Full time employees average at least 40 hours per week in
each payroll period - considered 1.0 FTE even if greater than
40 hours/week
 Part time employees in each payroll period calculate average
hours per week then divide by 40 (round to nearest tenth)
• Example: Average 30 hours per week during covered period divided
by 40 = .75 (round to .8)
 Alternative safe harbor calculation: Full time = 1.0; part time =
.5 regardless of hours (if less than 40 average)

17. Schedule A Worksheet
Include the following employees in FTE calc.
 Employees with written offer of re-hire that did not accept
 Employees fired for cause
 Employees who resigned
 Employees requesting a reduction in hours
If the position was filled with another person, then do not
include any employees described above

18. Schedule A Worksheet
How to calculate salary/hourly wage reduction
 Latest IFR made it clear to only consider the pay rate reduction (not
the hours – because that is considered in FTE calc)
 If no employees took a reduction in rate, then the entry for this
column is zero
 Safe harbor - If all employees that took a reduction in pay rate
between 2/15 and 4/26/20 are restored to their rate in place as of
2/15/20 by 6/30/20, then the safe harbor is met. No reduction.
 Otherwise, you must calculate the annualized average rate of pay
during Q1 2020 and compare that to the annualized average rate of
pay during the covered period. If >25% reduction, then insert the
difference on this worksheet. Note: calculations should be based on
the same hours worked in Q1 – no reduction of hours. (IFR, Loan
Forgiveness, 5/22)

19. Schedule A
This worksheet is relatively self-explanatory. The
information comes from Schedule A Worksheet.
The purpose is to calculate total payroll costs. That
amount is inserted on Line 1 of the Forgiveness
Application (pg. 1)
Note Line 9 is for self-employed, independent
contractors or partners only. No owners of C corps or S
corps.

20. Forgiveness Application (page 1)
Line 1: insert payroll costs from Line 10 of Schedule A.
Line 2: Mortgage interest
 Business mortgage obligation on real and personal property
(examples used were warehouse and vehicle)
Line 3: Rents
 Business rent payments (warehouse or vehicle)
 No other qualifications
 Self-rental still ok for now – be reasonable/consistent
Line 4: Utilities
 Electricity, gas, water, phone, internet, transportation (gas for
business vehicles)

21. Forgiveness Application (page 1)
Line 5: Adjustment for wage rate reduction (if any)
 Forgiveness amount is reduced for this factor before
reduction for FTE on Line 7
Forgiveness amount is the lesser of Lines 9, 10 and 11
Line 10 is the 75% requirement for payroll costs.
 No requirement that payroll costs be 75% of loan amount in
order to get any forgiveness

22. Last Poll Question
Would it be helpful in your situation if Congress were to
relax the requirement that payroll costs be at least 75%
of total forgiveness amount?
 Yes
 No

23. Lender Good Faith Review
Interim Final Rule – SBA Loan Procedures
 Confirm borrower certifications received
 Confirm all required documentation attached
 Confirm the borrower’s calculations on the application are
correct
 If all required supporting documentation is not provided,
the borrower will not receive any forgiveness.
 If the lender identifies errors in the borrower’s calculation
or missing documentation, then they should work with the
borrower to remedy the issue.

25. Final Questions?
Paul W. McEwan CPA, MTax, AIFA
Principal
Retirement Plan Services Group
330.308.6827
paul.mcewan@reacpa.com
Doug Houser, CPA, MBA, CEPA
Director of Construction & Real Estate
Services
(614) 314-5937
Doug.Houser@reacpa.com
https://home.treasury.gov/policy-issues/cares/assistance-for-small-businessesAdditional Resources: