July 23, 2020
Our prior Covered Period of eight weeks has passed, and the funds have been exhausted. All funds were used entirely for payroll. Now, we need to layoff some employees due to reduction in business. This will reduce the FTE count. How does this affect the PPP loan forgiveness with the extended Covered Period?
Posted by Armanino Financial Advisory Team
If you have used all PPP funds during the eight-week period, there is no advantage to elect a 24-week Covered Period. To the contrary, there is actually a disadvantage to do so for this very reason. Any layoffs that take place after the Covered Period will not affect your FTE Reduction Factor calculation. If you opted for the eight-week window and did the layoffs afterwards, you will not have your forgiveness reduced for this reason. But if instead you chose 24 weeks, any reduction during the 24 weeks will negatively impact forgiveness unless you filed your forgiveness application before the reduction.