The PPP loan amount is meant to fund the next eight weeks of payroll, including benefits through June 30, 2020. A maximum of 25% can be used for other costs, such as interest on mortgage obligations or existing debt obligations, rent, and utilities. The loan amounts will be forgiven if the employee compensation levels are generally maintained and the total number of employees generally doesn’t decrease. The payroll costs are capped at $100,000 on an annualized basis for each employee.
Payroll costs include: salary, wages, commissions, or tips; employee benefits including vacation time, sick leave and family medical leave; allowance for separation or dismissal; required payments for group health care benefits including insurance premiums; retirement benefit payments; state and local taxes; and for a sole proprietor or independent contractor: wages, commissions, income, or net earnings from self-employment, capped at $100,000 on an annualized basis for each employee. If you are using 2019 data, we suggest that you look at each employee’s Medicare wages as a reference for the “payroll” portion and then add the healthcare and retirement plan benefits.
Note, the forgiven portion of the loans does not cover payroll taxes withheld, including the employer match on Social Security and Medicare and Federal Income Tax withheld. Some banks are allowing the loans on gross payroll (i.e. not reducing it by the payroll taxes), while other banks are requiring the payroll to be reduced by the payroll taxes since they do not want any greater loan than the forgiven amount.