Loading...
FTE Calculations2020-07-08T23:38:28-07:00

QUESTION:

What if the normal work week is 35 hours?

Last Updated 07.08.2020

SUGGESTED INFORMATION:

If all employees only work 37.5 hours during the Reference period (Lookback Period) as well as the covered period, then there would be no change in FTE count when using the Simplified FTE calculation.  IF you reduced the number of staff, you would have a reduction to total FTE that would need to be addressed.

Self Employed with Employees2020-07-08T23:44:05-07:00

QUESTION:

How does the calculations work for a self-employed employer who also have payroll?

Last Updated 07.08.2020

SUGGESTED INFORMATION:

If a self-employed individual also has employees on payroll, they will calculate the average payroll cost for all employees as normal +  the equivalent wages for the owner based on 2019 net profit.  All employees’ wages are capped at $100,000 per employee. If the loan was received before June 5th, they can select between an 8-week covered period or a 24-week covered period. See below for the different formulas based on the selected covered period for employees and owners.

8 Week Period (Owners or Employees):
The total forgivable amount is capped at $15,385 = (8/52 weeks x $100,000).

24 Week Period (Owners):
The total forgivable amount is capped at $20,833 = (2.5/12 months x $100,000).

24 Week Period (Employees):
The total forgivable amount is capped at $46,154 = (24/52 weeks x $100,000).

Partnerships2020-07-08T23:34:10-07:00

QUESTION:

How do we handle partnerships when the owners take draws and they have W2 employees?

Last Updated 07.08.2020

SUGGESTED INFORMATION:

If a partnership also has employees on payroll, they will calculate the average payroll cost for all employees as normal +  the equivalent wages for the partners based on 2019 net earnings. Partnerships are not allowed to include retirement or health insurance contributions for the partners since they are already included  in their net self-employment income.  Since the draws should have been reported  on the individual net earnings reports, they will be included when calculating the  total cash compensation for the period.

All employees’ wages are capped at $100,000 per employee. If the loan was received before June 5th, they can select between an 8-week covered period or a 24-week covered period. See below for the different formulas based on the selected covered period for employees and owners.

8 Week Period (Owners or Employees):
The total forgivable amount is capped at $15,385 = (8/52 weeks x $100,000).

24 Week Period (Owners):
The total forgivable amount is capped at $20,833 = (2.5/12 months x $100,000).

24 Week Period (Employees):
The total forgivable amount is capped at $46,154 = (24/52 weeks x $100,000).

Health Insurance for Self Employed2020-07-08T23:34:10-07:00

QUESTION:

Can self-employed deduct health insurance?

Last Updated 07.08.2020

SUGGESTED INFORMATION:

No.

Schedule C or F filers are capped by the amount of their owner compensation replacement, calculated based on 2019 net profit

For self-employed individuals, including Schedule C or F filers and general partners, retirement and health insurance contributions are included in their net self-employment income and therefore cannot be separately added to their payroll calculation.

Covered Period Pay Cycles2020-07-08T23:34:11-07:00

QUESTION:

Is the Alternative covered Period on for employers with bi-weekly or weekly payroll?

Last Updated 07.08.2020

SUGGESTED INFORMATION:

Covered Period:

  • The covered period starts once the first PPP funding is deposited into the businesses account. If there are multiple PPP payments, the covered period still starts once the first funds have been received. Eight-week (56-day) period.

Alternative Payroll Covered Period:

  • 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
Average FTE2020-07-08T23:34:11-07:00

For Table 1, is the average FTE for the whole year for 2019?

Table 1 is used to calculate and document the:

  • Cash compensation,
  • Salary / hourly wage reduction
  • FTE value (Avg number of hours worked per week during the Covered Period or Alternative Payroll Covered Period/40 ) *round answer to nearest tenth.

Only list employees that received compensation during your chosen period (Covered Period or Alternative Payroll Covered Period)

Table 1: List employees who:

  • Were employed by the Borrower at any point during the Covered Period or the Alternative Payroll Covered Period whose principal place of residence is in the United States; and
  • Received compensation from the Borrower at an annualized rate of less than or equal to $100,000 for all pay periods in 2019 or were not employed by the Borrower at any point in 2019.
FTE Calculations2020-07-08T23:34:11-07:00

What if the normal work week is 35 hours?

If all employees only work 37.5 hours during the Reference period (Lookback Period) as well as the covered period, then there would be no change in FTE count when using the Simplified FTE calculation.  IF you reduced the number of staff, you would have a reduction to total FTE that would need to be addressed.

Form 3508 Line 82020-07-08T23:34:11-07:00

If the PPP Loan Forgiveness Form 3508EZ asks that you enter the smallest of Lines 5,6, and 7  onto Line 8, would this mean that loan forgiveness would be limited to 60% of Payroll Costs even if 100% of PPP Loan Amount was spent on payroll (Line 6)

After reviewing the 3508EZ form the first time, I too thought Line 8 would limit the amount of forgiveness. Upon further review, this is what I noticed:

Enter the smallest of lines 5,6,7:

Line 5: Combine the total Payroll (Line 1) and Non-Payroll (Line 2-4) Expenses. If this number were the lowest number that would suggest that you did not spend the entire amount of your PPP loan.

Line 6: The PPP Loan Amount. If this is the smallest number, this means your payroll expenses exceeded your loan amount and loan forgiveness is expected

Line 7:  Total Payroll Costs/0.60  = Another way to look at this calculation would be to say “Based on my total payroll costs, I would meet the 60% payroll requirement for a loan up X amount.

Let us assume that the PPP Loan was for 100,000
Our Payroll expenses were 80,000
Non-Payroll expenses were 10,000

These would be your line totals:
Line 5: 80,000+10,000 = 90,000
Line 6: 100,000
Line 7: 80,000/0.60 = 133,333.33

This means your maximum loan forgiveness would be $90,000

SBA Form 35082020-07-08T23:34:11-07:00

What happens if you use less than 60% of the loan on payroll?

If a person uses less than 60% of the funds toward payroll expenses, the total amount of potential loan forgiveness will be reduced to the point where the 60% threshold has been met. For example

PPP loan amount = $100,000.00
Payroll Expenses = $50,000.00
Non-Payroll Expense = 40,000.00

The original 60% threshold required at least 60,000 to be spent on Payroll.
Since we only spent $50,000.00 on payroll our max loan amount that would meet the loan threshold would have been $50,000/0.60 = $83,333.33

Based on the max loan forgiveness amount: $83,333.33
Payroll Expenses: $50,000.00
Non-Payroll Expense: $33,333.33

2020-07-08T23:45:58-07:00

About the Author:

Matthew Fulton is Co-Founder and CTO of Parkway Business Solutions where he uses his passion for technology to create time-saving tools for accountants (Vendorsync), and bookkeeping solutions to fit the needs of the modern small business owner. As the co-creator of QB Community Live, Matthew dedicates time helping his fellow community members dedicated to the belief that “Together We All Succeed”. When he’s not working, you’ll likely find Matthew walking his dogs Cylis, and Sophie on the beach in Ventura, CA where it’s always another “beautiful day in paradise!” Connect with Matthew on Facebook or Twitter @Parkwayinc and subscribe on YouTube at https://youtube.com/Parkwayinc

Leave A Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Recent Tweets