July 23, 2020
Two owner-employees in our S Corp had an increase in salary in mid-2019. Therefore, their salary is greater in 2020 than the average 2019 number that contributed to the calculation of the original PPP funds. For the forgiveness application, can we include the increased salary, or do we need to stay with 2019 salaries?
Posted by Armanino Financial Advisory Team
To calculate payroll costs, add up the total amount paid to your employees during the Covered Period you choose. Apply the maximum limit threshold explained elsewhere where necessary. Then add in any employer payments made for health insurance, retirement benefits or state/local taxes on compensation. Their 2019 pay level is irrelevant to how much payroll cost you can claim for your Covered Period in 2020. The 2019 pay comes into play only in determining whether they should be considered for the Salary Reduction Factor later on, so ignore it for payroll cost purposes.