PPP Recommended Supporting Documentation for Loan Forgiveness
Eligible payroll costs:
Borrowers are generally eligible for forgiveness for the payroll costs paid or incurred during the 24-week or 8-week Covered Period* (or Alternative Payroll Covered Period**). Payroll costs are considered paid on the day that paychecks are distributed or the Borrower originates an ACH credit transaction. Payroll costs are considered incurred on the day that the employee’s pay is earned. Payroll costs incurred but not paid during the Borrower’s last pay period of the Covered Period (or Alternative Payroll Covered Period) are eligible for forgiveness if paid on or before the next regular payroll date. Otherwise, payroll costs must be paid during the Covered Period (or Alternative Payroll Covered Period). For each individual employee, the total amount of cash compensation eligible for forgiveness may not exceed an annual salary of $100,000, as prorated for the Covered Period.
Documentation verifying the eligible cash compensation and non-cash benefit payments from the Covered Period* or the Alternative Payroll Covered Period** consisting of each of the following:
(a) Bank account statements or third-party payroll service provider reports documenting the amount of cash compensation paid to employees.
(b) Tax forms (or equivalent third-party payroll service provider reports) for the periods that overlap with the Covered Period or the Alternative Payroll Covered Period:
i. Payroll tax filings reported, or that will be reported, to the IRS (typically, Form 941); and
ii. State quarterly business and individual employee wage reporting and unemployment insurance tax filings reported, or that will be reported, to the relevant state.
(c) Payment receipts, cancelled checks, or account statements documenting the amount of any employer contributions to employee health insurance and retirement plans that the borrower included in the forgiveness amount.
- Eligible cash compensation includes: gross salary, gross wages, gross tips, gross commissions, paid leave (vacation, family, medical or sick leave), and allowances for dismissal or separation. This may include bonus, hazard pay, and salaries to furloughed employees.
- Do not include compensation in excess of an annual salary of $100,000 annualized, as prorated for the covered period. Therefore, the payroll schedule should show no employee with more than $46,154 in compensation if selecting the 24-week period (or $15,385 for the 8-week period, if eligible and selected).
- Do not include payments to independent contractors, or compensation to employees whose principal place of residence is outside the US; or qualified sick and family leave wages for which a credit is allowed under sections 7001 and 7003 of the Families First Coronavirus Response Act.
Eligible non-payroll costs:
Non-payroll costs eligible for forgiveness consist of:
(a) Covered mortgage obligations: payments of mortgage interest (not including any prepayment or payment of principal) on any business mortgage obligation on real or personal property incurred before February 15, 2020 (“business mortgage interest payments”);
(b) Covered rent obligations: business rent or lease payments pursuant to lease agreements for real or personal property in force before February 15, 2020 (“business rent or lease payments”); and
(c) Covered utility payments: business payments for a service for the distribution of electricity, gas, water, telephone, transportation, or internet access for which service began before February 15, 2020 (“business utility payments”).
An eligible non-payroll cost must be paid during the Covered Period or incurred during the Covered Period and paid on or before the next regular billing date, even if the billing date is after the Covered Period. Eligible non-payroll costs cannot exceed 40% of the total forgiveness amount.
The two types of evidence required for non-payroll costs are:
(1) documentation verifying existence of the obligations/services prior to February 15, 2020; AND
(2) proof of eligible payments from the Covered Period
Additional Information on PPP Loan Forgiveness:
Please visit the SBA website for complete information on loan forgiveness. The forgiveness applications and accompanying instructions provide additional details on required documentation and can be accessed using the links below:
- 3508 PPP Loan Forgiveness Application
- 3508EZ PPP Loan Forgiveness Application
- 3508S PPP Loan Forgiveness Application
*Covered Period: This is either (i) the 24-week (168-day) period beginning on the PPP Loan Disbursement Date, or (ii) if the loan received an SBA loan number before June 5, 2020, the Borrower may elect to use an eight-week covered period. For example, if the Borrower is using a 24-week covered period and received its PPP loan proceeds on Monday, April 20, the first day of the covered period is April 20 and the last day of the covered period is Sunday, October 4. In no event may the covered period extend beyond December 31, 2020.
**Alternative Payroll Covered Period: For administrative convenience, borrowers with a biweekly (or more frequent) payroll schedule may elect to calculate eligible payroll costs using the 24-week period that begins on the first day of their first pay period following their PPP Loan Disbursement Date (the “Alternative Payroll Covered Period”). This election is also available for borrowers who elect to use the 8-week period.