Section B - Completing the Form
This section discusses the content of how you complete the form. This page contains information that is common to the three types of applicants, while the links below cover the specifics on:
- For profit businesses that have employees, regardless of business form.
- Self-employed, independent contractors, and single-member LLCs.
- 501(c)(3) non-profits.
Common to three entity types
The PPP provides for a forgivable loan equal to 2.5 times "average" monthly payroll. This average is generally calculated over a 12 month period which can be either the calendar year 2019 or the 12 months from April 1, 2019, to March 31, 2020. There are two exceptions, one for seasonal businesses and the other for business that did not exist in 2019. (See SBA.gov for more information on these two exceptions.)
Payroll for "for-profit" entities and non-profit 501(c)(3) entities is calculated the same and is described in Section B-1. The reason there is a separate discussion of non-profits in Section B-3 is the difference in disclosure on beneficial owners for for-profits vs. managers for non-profits.
Payroll includes what the entity pays the employee directly, plus other payroll related expenses paid by the entity (not deducted from the employee), including benefits, retirement contributions, and state and local taxes paid by the employer. In many jurisdictions, including Georgia, this last item is usually only unemployment taxes paid to the Department of Labor. Employer contributions on federal taxes are not included in what constitutes payroll.
There is a cap on salaries to employees of $100,000 annually ($8,333 per month on the average. This is prorated where the employment is for less than 12 months. (Cap is $8,333.33 times number of months worked.) This same limitation applies to the self-employed (independent contractors).
As a result of the $100,000 per year limit, the maximum loan is approximately $25,000 per employee, assuming each employee is making $100,000 per year or more. Benefits of $20,000 per year brings the annual allowable payroll to $120,000 or $10,000 per average month. Multiplying $10,000 average monthly payroll times 2.5 equal a loan of $10,000. So, a sanity check on the application, regardless of entity type, is $25,000 times the number of employees.
The payroll amounts apply only to US based employees (who receive a W-2), not to independent contractor and others that receive a 1099 for their wages.
Appropriate documentation for payroll (except for the self-employed) is generally:
- Documentation on the payroll paid, which is usually a list of each payroll period for all employees. A listing from a payroll service is ideal. More informal records can be acceptable, such as a ledger, provided this documentation is credible and supports the claimed amounts.
- Confirmation of the payroll amounts, usually in the form of quarterly 941 forms and the annual 940.
- Evidence that the amount of compensation over $100,000 prorated annually has been properly calculated and subtracted from average payroll.
- Evidence of each additional expense item included in the calculation of payroll must be provided.
Note that independent evidence is required on tax-payer identification numbers (Employer Identification Numbers and Social Security Numbers).
The three links below discuss the differences in completing the Application for the three different types of businesses, for-profit, self-employed, and non-profit.
Note that Section C, the last advice item, provides information that is applicable to all three types of entities.