On Tuesday, June 23rd at 1 PM PST / 4 PM EST, we hosted a Live Q&A about PPP Loan Forgiveness. Whether your loan was issued through Square or another lender, we’re here to help you navigate the SBA’s forgiveness requirements and put them into practice as you spend your PPP funds.
Experts from Square Payroll and Square Capital answered your questions on what to do so you set yourself up for PPP loan forgiveness. Our Square Payroll team answered questions about what you need to do to pay your employees using PPP funds, what reports you’ll need to keep track of for forgiveness, and how to be sure to document this on your taxes. The Square Capital team answered questions about the forgiveness process and eligibility for loan forgiveness.
Some example questions include:
- How can I show proof that I spent the PPP funds?
- Does the payroll cost for the owner count towards the forgivable part of the loan?
- I received a PPP loan, can I also apply for an EIDL and have my PPP loan converted to a grant?
Hi, I applied based on schedule-C, I need to know for the other 25% part, what expenses I can claim, usually on my schedule C, I claim my license renewal fee, malpractice insurance, cell phone, home internet.
Can I claim any of these Fees, if yes, should they be prorated ?
Wednesday, June 17th Update:
Hello again, everyone! I'm writing to keep you looped in on an update to our strategy. Due to the large response and interest in this topic, we've decided to pause further question submissions to this Live Q&A post.
We want to be sure that we get all of your questions answered and we're working to get everything organized. A handful of sellers raised concerns about being able to find the information they need as a result of the large number of replies. Rest assured that we'll address the overarching themes as well as the nuanced scenarios that people raised.
What this means for you:
Our Payroll and Capital teams are actively reviewing all of the posts submitted so far, and will answer all questions at once on Tuesday, June 23rd, after the review process is completed.
What you can do in the meantime:
Be sure to subscribe to this post for updates so that you receive email notifications as we reply on Tuesday, June 23rd. To subscribe for updates, you must be signed in: click Thread Options > Subscribe.
In addition, you can review these articles in our Support Center for general information on PPP Loan Forgiveness:
We won’t be able to address account-specific issues in this Q&A. Those are best directed to our Customer Success team via email or phone to keep your account secure.
Thank you again for posting your questions and for your patience as we make sure our replies are in shipshape.
Hello! My name is @Chrystina from the Square Payroll team. Thank you all for submitting your questions, and for your patience as we worked together with Square Capital to gather resources for Paycheck Protection Program loan forgiveness. With that, please read on below.
Please check out the Forgiveness section of our PPP FAQ for more information on what you need to do to prepare for loan forgiveness.
We noticed a lot of similar questions come through from many folks. Here's a list of the top questions and answers:
Question: When will your PPP loan forgiveness application be ready for us to complete?
Answer: We’re working on an easy loan forgiveness application and will notify you by email and in the Square Dashboard when it’s ready. No action is needed from you right now for loan forgiveness. You don’t need to fill out the application on the SBA website and submit it to us, and you don’t have to send us any documents yet.
Question: I am an independent contractor who uses a single household checking account only. No payroll account or separate business account. How do I document that my PPP loan was used for ‘payroll’?
Answer: As an independent contractor, sole proprietor, or self-employed individual, if your covered period is eight weeks, you get eight weeks of your 2019 net profit (as reported on your Form 1040 Schedule C) forgiven, capped at $15,385 per individual. If your covered period is 24 weeks, you get 2.5 months of your 2019 net profit (as reported on your Form 1040 Schedule C) forgiven, capped at $20,833 per individual. This is called the Owner Compensation Replacement and was recently introduced by the SBA. To get your remaining PPP funds forgiven, you will need to spend it on business utilities, rent, and mortgage interest expenses (to the extent such expenses are deductible on your Form 1040 Schedule C). Telephone and internet bills are considered utilities costs. Other types of expenses appear to be ineligible for forgiveness at this time. Make sure to keep your documents showing your payments for these expenses during the covered period.
Question: I have a sole proprietorship and received the PPP. When I was offered the loan it gave me two amounts. One smaller and one bigger. I chose the smaller amount as it said it did not have to be repaid. Is this true?
Answer: If you chose the smaller amount, it is likely that most, if not all, of this amount will be eligible forgiveness when you apply.
For PPP forgiveness, “owner compensation replacement” counts as an eligible payroll cost, because - in effect - you are paying yourself by replacing the net profits that your business would otherwise have earned without the crisis. If you had the choice between two loan sizes and you chose the smaller one, then your loan size was equal to 8 weeks of your business’s 2019 net profits, which is the cap on owner compensation replacement. As a result, 100% of your loan proceeds will be considered a payroll cost and the entire loan amount should be eligible for forgiveness, regardless of what you spend the money on. Please note that you still need to submit a forgiveness application through Square Capital in order to get the loan forgiven, but we will know ahead of time that this was the case and set up your application appropriately. Watch out for an email and an update to your Square Dashboard for when the forgiveness application is ready.
Question: Do I have to use an official payroll system (like Quickbooks) to pay myself instead of transfers between my business and personal bank accounts (which is how I currently pay myself)?
Answer: You do not need an official payroll system to be eligible for forgiveness. If you are an independent contract, sole proprietor, or self-employed, you do not need to show transfers between your business and personal bank accounts for your payroll costs to be eligible for forgiveness. For PPP forgiveness, “owner compensation replacement” counts as an eligible payroll cost, because - in effect - you are paying yourself by replacing the net profits that your business would otherwise have earned without the crisis.
If you choose the 8-week covered period, then your “owner compensation replacement” will equal 8 weeks worth (8/52) of your 2019 net profit, capped at $15,385. If you choose the 24-week covered period (or received your loan after June 5, 2020), then your “owner compensation replacement” will equal 2.5 months worth (2.5/12) of your 2019 net profit, capped at $20,833. You do not need to show documentation of how you spent these funds, just that you had this net profit in 2019 (e.g., with a 2019 Form 1040 Schedule C).
If your loan proceeds exceed the above amounts for “owner compensation replacement”, you will need to show documentation that the excess was spent on eligible non-payroll costs (business mortgage interest, business utilities, business rent) in order for it to be eligible for forgiveness. Such non-payroll costs must be deductible on your Form 1040 Schedule C.
Question: Where do I submit documentation for PPP forgiveness and what documents are required?
Answer: Square Capital is working on an easy way to upload documents and calculate how much of your loan is eligible for forgiveness. We will notify you as soon as it is ready through email and your Square Dashboard in the next few weeks. In the meantime, no action is needed from you right now for loan forgiveness. You don’t need to fill out the application on the SBA website and submit it to us, and you don’t have to send us any documents. You can start collecting documents you’ll need to apply for forgiveness. These documents may include:
- Documents and receipts that prove how you spent the funds such as:
- Payroll costs:
- Bank account statements or third-party payroll service provider reports
- Tax forms such as IRS payroll tax filings and state quarterly business and employee wage reporting and unemployment insurance tax filings.
- Payment receipts, cancelled checks, or account statements documenting employer contributions to employee health insurance and retirement plans
- Non-payroll Costs - receipts, cancelled checks, or account statements for all categories, and additionally:
- Business Mortgage: lender amortization schedule
- Business rent/lease: current lease agreement
- Business utility: invoices from February 2020 and covered period.
- Full-time equivalent (“FTE”)
- Documentation showing average employees during your chosen reference period (or between January 1, 2020 and the end of your Covered Period) such as payroll tax filings (e.g. Form 941), state quarterly business and individual employee wage reporting and unemployment insurance tax filings
Question: Is it true that the timeline has been changed from 8 weeks to 24 weeks to use the PPP money?
Answer: Yes. If you received your loan before June 5, 2020, you can now elect between a covered period of 8 weeks or 24 weeks from the day you received your funds to spend on expenses eligible for forgiveness. If you received your loan after June 5, 2020, you have 24 weeks to spend your funds on expenses eligible for forgiveness.
You also have until the earlier of December 31, 2020 or the date your loan forgiveness application is submitted to rehire staff and return wages to 75% of pre-crisis levels to maximize your forgiveness amount. You can also spend up to 40% of your loan on eligible non-payroll costs, up from 25% previously, and still have the full loan forgiven. The updates to the safe harbor deadline and the non-payroll cost percentage apply to all PPP loans, including those issued before the new rules went into effect.
Question: Why is the EIDL grant being deducted from the forgiveness amount on the PPP loan?
Answer: If you received both an EIDL advance and a PPP loan, the CARES Act specifies that the EIDL advance will be deducted from your PPP loan forgiveness amount. For example, if you receive a $5,000 EIDL advance and a $15,000 PPP loan, only $10,000 of your PPP loan is eligible for forgiveness. Your EIDL advance does not need to be repaid.
Question: I just received PUA unemployment and I also got the PPP loan. Was that ok and is my loan still forgivable?
Answer: You’re able to apply for either the PPP or unemployment, but you cannot have both. If you choose to keep your PPP loan, you must withdraw from receiving unemployment benefits.
Question: Can 100% of the loan be used to pay for payroll? What is the maximum that can be used toward payroll?
Answer: Yes, you can use 100% of your PPP loan for payroll costs and have the loan be fully forgiven. A minimum of 60% of your loan amount must go to payroll costs in order to qualify for full forgiveness.
Question: Does PPP forgiveness apply to new employees?
Answer: Yes. If you have reduced your headcount, you can either rehire the same employees or hire new employees to get back to pre-crisis staffing levels to be eligible for full forgiveness. You will need to get back to the same pre-crisis headcount levels by the earlier of December 31, 2020 or the date your loan forgiveness application is submitted to be eligible for full forgiveness.
Question: Will Square help with needed proof of PPP if we use Square for Payroll?
Answer: Yes, we plan to generate a PPP Forgiveness Report that details eligible payroll costs over the chosen loan forgiveness period. We also plan to help calculate your Full-Time Equivalency (FTE) and Salary/Hourly Wage Reductions. Note this functionality may not be immediately available when the Square forgiveness application first becomes available. This will be in addition to the tax filings we complete on your behalf and other custom reports we provide.
Question: What is the PPP lender loan number? I don’t see it anywhere and it was one of the questions on the SBA’s forgiveness form. Where can I find this information?
Answer: We will automatically include the PPP lender number in your forgiveness application when it’s available for you to fill out. We’re working on an easy loan forgiveness application and will notify you by email and in the Square Dashboard when it’s ready in the next few weeks. No action is needed from you right now for loan forgiveness. You don’t need to fill out the application on the SBA website and submit it to us, and you don’t have to send us any documents yet.
Tuesday, June 23rd Update:
Good afternoon, everyone!
I'm checking in with a reminder that, due to the large response for this Q&A, we've turned off the ability to post further replies in this thread.
For a summary and answers to the top questions, have a look at the Best Answer. In addition, you can learn more about PPP Loan Forgiveness in our Support Center:
Thank you to everyone for your patience and for participating in this event. I hope this information helps your business as you navigate through next steps.
So now that we know we can't have both the PPP and Unemployment, how can I pay back the PPP? At the time that I applied for PPP, my Unemployment had not been approved yet (I am a Sole Proprietor with no employees). Now that Unemployment has approved me, I would rather pay back the PPP since I still have not been able to regain my income. I would prefer to pay back the PPP as quickly as possible so that I don't endanger my Unemployment.
I moved your post to an existing thead where our Capital team answered all these questions.
Check out the answers on the first page or throughout the thread.
I have been receiving unemployment while my store has been closed, but have been paying rent. Can I use 40% of my PPP loan to pay the rent, as long as I don’t pay myself with the other 60%?
I moved your post to our past thread where sellers asked the same questions about the PPP program and PPP forgiveness.
Check out the answers throughout this thread and they should be able to answer your question. As for unemployment we can't speak for that since we're not the ones dealing with that through Square but I'd recommend googling PPP and unemployment to try and find some resources.
I moved your posts to an existing thread where our Capital team answered all these questions as well as linked the article in our Support Center that goes over this more.
Check out the thread for answers.
I received my PPP loan from Square (thank you) on May 1st. Since I've been back to work since June 1st, do I need to wait 24 weeks to apply for forgiveness? I know square is preparing an easier form. Will this form be released only after 24 weeks?
Application is online with SBA, the economy is not recovering anytime soon. Talks of possible second-round funding may be avail soon so really wanted to get my forgiveness App. in sooner than later Please Advise.