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Preparing your Paycheck Protection Program Loan Forgiveness Application

The Small Business Administration (SBA), in consultation with the Department of the Treasury, recently released the Paycheck Protection Program (PPP) Loan Forgiveness Application, and detailed instructions for the application.
The application and instructions can be found at home.treasury.gov.
The application forms and instructions inform borrowers how to apply for forgiveness of their PPP loans.  The 11 page document includes instructions, the application, Schedule A and Schedule A Worksheet.  Additional information will be coming from SBA to further assist borrowers.

However, in an effort to get you information in a timely manner Yankee is highlighting the following 4 areas;
 
1. If you received an Economic Injury Disaster Loan  (EIDL) Advance (the grant portion of EIDL) the application requests this information in the top section.  The amount of the EIDL Advance will reduce Line 11- Forgiveness Amount, as noted in the instructions for line 11.

“If applicable, SBA will deduct EIDL Advance Amounts from the forgiveness amount remitted to the Lender.”


2. The option for borrowers to use an “alternative payroll covered period” applies only to payroll costs to align with borrowers’ regular payroll cycles and not the eligible non-payroll costs. 
 
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 eight-week (56-day) period that begins on the first day of their first pay period following their PPP Loan Disbursement Date (the “Alternative Payroll Covered Period”).

3. There is some flexibility for non-payroll costs to be paid outside of the Covered Period.  The following highlighted section is included with the instructions.  Remember, non-payroll cost cannot exceed 25% of the forgiveness amount.
 
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.
 
4. Self-employment and general partner income is a critical area to understand for those individuals that qualify.  If you are including amounts paid to self-employed individuals or partners on Line 9, of the Schedule A you need to pay careful attention to the highlighted language below from the instructions for Schedule A. 

Line 9: Enter any amounts paid to owners (owner-employees, a self-employed individual, or general partners). This amount is capped at $15,385 (the eight-week equivalent of $100,000 per year) for each individual or the eight-week equivalent of their applicable compensation in 2019, whichever is lower.
 
Self-employed individuals will need to use the following to determine the eight-week equivalent of their applicable compensation in 2019.
 
2019 IRS Form 1040 Schedule C line 31 net profit amount divided by 6.5.
2019 IRS Form 1040 Schedule F line 34 net farm profit divided by 6.5.

General Partners will need to use the following to determine the eight-week equivalent of their applicable compensation in 2019.
 
2019 Schedule K-1 (IRS Form 1065) Net earnings from self-employment of individual U.S. based general partners that are subject to self-employment tax, computed from box 14a (reduced by any section 179 expense deduction claimed, unreimbursed partnership expenses claimed, and depletion claimed on oil and gas properties) multiplied by 0.9235 then divided by 6.5.
 

If you received your PPP loan from YFC, we would appreciate your competed  Loan Forgiveness Application and supporting documentation by August 1, 2020. This will allow us to review and follow up with you in an orderly fashion and not have any risk of missing important SBA deadlines for forgiveness. 

 
Please mail, email, or fax your competed application to your Loan Officer or local Yankee Farm Credit office. If you would like to hand deliver your documents, please call ahead of time to notify the office staff. Office location information can be found on our website locations page by clicking here.
 
As you prepare your Loan Forgiveness Application, remember Yankee is here to help. Please contact your Loan Officer or local office with any questions, or email us at info@yankeefarmcredit.com.

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