The SBA has now released the form for the PPP loan forgiveness. Many details in this form were known already, for example, the calculation details. But there is also new information in the form, such as the documentation requirements.
There are two sections of documentation requirements: Documents that the borrower must submit and documents they must maintain.
Make sure to join Johan Colvig for his webinar "Learn How to Manage & Advise on PPP Forgiveness," on May 20 at 2:00 p.m. Eastern Time. Register here.
Documents that the borrower must submit
These documents fall into three categories: Payroll, FTE, and Nonpayroll.
Payroll
- Salary: Bank statements or payroll reports showing salaries paid to employees.
- Tax Forms: Form 941 or similar can be used. If the payroll processor has a similar
- report, this can be used as well. Also include state tax reports.
- Health Insurance: Payment receipts, cancelled checks, or account statements.
FTE (Full-Time Equivalency)
The borrower must document their average FTE in the selected reference period. The selected reference period can be:
- February 15th - June 30th, 2019
- January 1st - February 29th, 2020
- Seasonal businesses can choose any consecutive 12 weeks period between May 1st - September 15th, 2019.
There are 4 options for the FTE documentation:
- Form 941 or similar filled to the IRS
- State quarterly tax reports
- Employee salary reports
- Unemployment insurance tax filings
Nonpayroll
The documentation must show payments in February 2020, the covered period and one month after the covered period.
- Business Mortgage: L ender amortization schedule and receipts or cancelled checks. An account statement from the lender or bank can also be used.
- Rent or lease: The current lease agreement and receipts or cancelled checks. An account statement from the lessor or landlord can also be used.
- Utility Payments: Invoices and receipts or cancelled checks. Account statements can also be used. For utility payments the documentation doesn't have to show the month after the covered period.
Documents that the borrower must maintain
- Employees: Documentation showing their salary and average FTE. The calculation of the salary reduction must be included as well. The 2019 salary documentation must be kept as well. This is to show if they have received an annualized rate of more than $100K for any pay period of 2019.
- Change in any employee's employment status: T his is to document the average FTE in the covered period. If the borrower fired an employee and was unable to rehire them, the documentation should include the job offer and refusal. Also document firings for cause or voluntary resignations. If any employee has requested a reduced work schedule, that should be documented as well.
- FTE Safe Harbor: Calculation and documentation of the FTE Safe Harbor criteria. Use this calculation to show that FTE levels are restored to pre-crisis levels.
- PPP Loan: All documents related to the PPP loan. This includes all documents that were submitted with the PPP loan application.
- PPP eligibility: Documents showing that the borrower needed the PPP loan.
- PPP compliance: Documentation demonstrating the Borrower’s material compliance with PPP requirements.
The SBA states explicitly that the borrower must retain these documents for 6 years. It also states that the SBA might request access to these documentations in that period. In other words, the SBA might conduct an audit of the loan and the forgiveness within that 6 years period. If the borrower is unable to present all documents listed above, the SBA will determine that the borrower was ineligible for the loan.
I strongly recommend that every borrower go through this list of documentation. They should make sure that they have all the documents in place. Accountants should also seize this opportunity to upsell advisory services to their clients. Many clients will not be able to compile all these documents on their own.
Use a transactional reporting solution where documents can be attached to each transaction. The solution, such as MoreReporting, should also warn if any documents are missing. It should also be possible to organize and maintain the documents for the duration of the 6 years.
Photographer: Scott Wilhite
johan covig
Make sure to join Johan Colvig for his webinar "Learn How to Manage & Advise on PPP Forgiveness," on May 20 at 2:00 p.m. Eastern Time. Register here.
Author Bio: Johan Colvig has 15+ years of experience as an industry leader in the business intelligence space. He is also a co-founder and architect of MoreReporting, the most advanced financial analytics tool for QuickBooks. His core philosophy is "AI Assisted Advisory." He believes that AI should augment accountants to become advisors to their clients. Before MoreReporting, Johan was a co-founder of Infotrust A/S based in Europe. Infotrust was a leading SAP business intelligence partner. They won the Partner of the Year award 4 times in the Europe North region. He has 8 years of experience in teaching financial analysis. He has been a keynote speaker in different conferences in the US and abroad.