July 23, 2020
I came away from the last webinar with the understanding that only 75% of the amount that I spend on payroll could be eligible to be forgiven. Am I correct?
Posted by Armanino Financial Advisory Team
No, that is incorrect. The rules have changed, but let’s first correct the misperception in your question. The payroll threshold test did not say that you could only get 75% of whatever you spent on payroll forgiven — that would be to multiply payroll costs by 0.75. Rather, you would divide by 0.75, in effect “grossing up” your payroll costs. So, under the old rules, at least 75% of the total amount spent (not just the amount that you spent on payroll) needed to be spent on payroll costs in order to maximize forgiveness. Under the new rules enacted by the PPP Flexibility Act, this 75% threshold has been reduced to 60%. In either scenario, every payroll dollar funded by PPP money will count toward forgiveness except for any amounts paid in excess of $15,385 (eight-week Covered Period) or $46,154 (24-week Covered Period) to any single employee.