Back in mid-April, the most confusing part of the Paycheck Protection Program was navigating the process of getting a loan. Now business owners are faced with a potentially more complicated head-scratcher: getting the loan forgiven, which was a core selling-point of the program.
Without further guidance, confusion abounds. So Inc. magazine asked finance and legal experts how they’re advising clients on some of the most common points of confusion related to loan forgiveness.
I got a PPP loan, but we’re still closed and my employees have almost nothing to do. Can I ask them to all take their paid vacation time now?
To qualify for loan forgiveness, says Jody Padar, a CPA and vice president of strategy for accounting-technology company Botkeeper, anything you pay this year should be generally consistent with how and when you’ve paid it in prior years. If everyone in your company typically takes a vacation during the eight-week period, you might be OK. But you can’t make everyone use up all their paid vacation just because you have no work for them, and then ask for that pay to be forgiven.
If I fire someone, and they get severance, does that payment count as payroll for purposes of calculating my loan forgiveness?
The PPP language in the Cares Act doesn’t specifically mention severance, says Susan Gross Sholinsky, a member of the law firm Epstein Becker Green. But the definition of “payroll costs” includes “allowance for separation or dismissal,” which would mean the severance could be forgiven. Erik Asgeirsson, the CEO of AICPA.com, isn’t so sure, because the intent of the law is to keep people employed.
Can I make all my retirement contributions for the year in the eight-week forgiveness period, and have those payments count as payroll for the purposes of loan forgiveness?
Again, says Padar, it comes down to what you’ve done in prior years. If you have a lot of seasonality in your business and typically would make this payment during the eight-week period, then you could be fine.
If all of my people are working like crazy now, say 80 hours a week, can I count each of them as two employees for the purposes of maintaining my headcount?
No, says Sholinsky. “That’s a little too creative. I wouldn’t go there.” Read the full story from Inc.
