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PPP Forgiveness Rules

Dear Clients of SKJ & Company, P.S.:

We understand many clients are in the process of obtaining PPP loan. Due to the loan’s unique ‘forgiveness’ feature, it is important to understand qualified use of the loans and other requirements for loan forgiveness. Please find more detailed information below.


If you have already received PPP fund, please let us know the following:

1.       Business / Entity Name

2.       PPP Loan Amount

3.       Date the loan was funded

4.       Name of the lender

3 basic rules to follow:

1.       75% / 25% rule

a.       At least 75% of the loan amount must be spent on payroll costs during 8-week period.

                                                   i.      This excludes any wages paid to one employee beyond 100k.

                                                 ii.      Payroll costs include wages, tips, bonuses, sick pay, health insurance, 401(k), etc.

                                               iii.      Wages claimed for Sick Leave Tax Credit or Employee Retention Credit are excluded.

b.       Remaining amount must be disbursed for rent, utilities and loan interest.

                                                   i.      The loan and rent must be in effect prior to 2/15/2020.

2.       Full-time Equivalent (FTE) rule

a.       Number of FTE must be maintained.

b.       Period compared for FTE count:

                                                   i.      8-week period starting when PPP was funded, vs.;

                                                 ii.      1/1/2020-2/29/2020 or 2/15/2019-6/30/2019, whichever is smaller.

3.       Wage-reduction rule

a.       Payroll costs must be at least 75% of the most recent quarter (Q1 2020 in most cases).

4.       #2 & #3 rules are ignored if employee hours and wage level is restored by 6/30/2020.

a.       There is not yet specific guidance on how this is calculated.


The above example is prepared for educational purposes only. Please note some rules may be updated, thus, your loan forgiveness amount may differ.


Few Tips:

1.       Stop unemployment benefit immediately once the loan is funded.

2.       Do not pay an employee more than $100k a year in average.

a.       $8,333 monthly, $3,846.15 biweekly.

b.       This includes tips and other employee benefits.

3.       Increase officer wages and hours, if currently not reported full-time.

4.       Offer sick leave pay if employees have accumulated hours.

5.       Corporate Officers and self-rentals: make sure to issue checks to keep the record of expenses.


Thank you,

SKJ & Company, P.S.