I've started to make a list of things I've learned about the peculiarities of an S-Corp filing for the PPP loan. An S-Corp's single owner or majority owner may have a different situation than LLCs or other small business owners.
INCLUSIONS:
W2 reported income
Retirement benefits: 401(k), SEP, SEPA
Healthcare benefits: medical and dental insurance premiums i.e. W2 Box 14 (S-Corp medical)
Healthcare benefits: HRA plan* (so I'm told, unconfirmed by my lender)
EDIT: Vision benefits
EDIT: FUTA/unemployment insurance prior to Feb 15, 2020.
EXCLUSIONS:
Owner's draws / pass-thru income
Healthcare benefits e.g. HSA plan
Group life insurance
EDIT: Employer-paid Federal taxes including FUTA after Feb 15 2020. This is not pro-rated, so if you pay your employees monthly or bi-monthly and that payday is on or after Feb 15 2020 then that entire pay stub excludes the taxes. For example, if you pay monthly on the 25th of the month then you exclude all Fed taxes for Feb 2020 onward.
@sunrise88 I think FUTA is allowable for businesses with continuous operations in 2019 through present, however, after Feb 15 2020 that cost must be removed. My payroll company back out those costs in their report after Feb 15 for the calculation.
@kompresor Not FUTA, that's federal unemployment tax. Workers Compensation, which required for a good amount of businesses that have W2 employees. The rates vary depending on what type of business you own.
@kompresor A bit late to the post. Not a tax pro at all. Hoping to ask a question if I may:
We have a 2-member S-corp that was recently approved for a PPP loan.
Does this mean that they will forgive the $15,385 / individual on the payroll side and we can then use our 401(k) contributions for the remainder of the PPP loan forgiveness? If so, do the 401(k) contributions have to be during the 8-week period? Is the amount pro-rated over an 8-week span? And if that isn't enough, tack on a 8-week prorate on employer-sponsored healthcare plan amounts?
@gregorydens Hard to know without further clarification from SBA and Treasury Dept.
It seems that once funds are dispersed then within 8 weeks the money must be spent on allowable Payroll Expenses, during that time. So to your point and question, I think a pro-rata amount of 2019 (i.e. prior 12 months) of costs for each fo the following:
Note: 8/52 = 0.1538
Gross Wages
SUTA
Health Insurance Premiums
Dental Insurance Premiums
Vision Insurance Premium
HSA contributions
Retirement contributions (SEP, or 401(k) - is it pro-rata for 2019 or is it up to the total contribution amount? This is a KEY QUESTION.
Since many people have discovered to reach the 75% they must have a slight increase in the pro-rata numbers from 2019, the big question is what will be permitted for the forgiveness?? Can W2 income during that 8-week period exceeds the total 2019 level? Can a one-time bonus be paid as W2 income? As it stands pay cycles do not line up with the 8-week window, so this gets tricky. Then for the retirement does it mean ONLY a pro-rata contribution during the 8-week period or a one-time retirement contribution towards the end? What if the total Payroll Expenses incurred are only 72-73% and not 75%, could a small increase in the retirement contribution which is below the 2019 level but higher than the pro-rata for 8-week be permitted?
@bingo No. The loan amount has nothing to do with Rent, Lease, Mortgage interest, or Utilities.. However, you can use the funds to pay those business expenses.
Keep in mind to meet the standard for PPP loan forgiveness at least 75% of the funds shall be used for Payroll expenses during the ~2 month window.
