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Paycheck Protection Program Report

Jan 20, 2021 update: Gusto has updated our PPP Loan report to include all employee federal taxes imposed or withheld regardless of the lookback period. We have made this update to align with the latest Treasury FAQ published on January, 19 2021. You can find your Paycheck Protection Program Loan report by going to the Reports section in Gusto account, and selecting Paycheck Protection Program Loan.

 

General information

What is the “second draw” PPP loan?

This second draw allows smaller and harder-hit businesses to receive a second loan from the Paycheck Protection Program (called a “PPP second draw”) with a maximum amount of $2 million.

Are there different rules for the second draw of PPP funds?

When applying for a second-draw loan, you’ll need to show a 25% decrease in revenue compared to 2019 and have fewer than 300 employees. Learn about second draw requirements here

Entities in industries assigned to NAICS code 72 (Accommodation and Food Services) may receive loans of up to 3.5x average monthly payroll costs. If this applies to your business, note that you may need to provide additional evidence to your lender to receive a loan.

Who is eligible to apply for a second-draw PPP loan? 

Entities eligible for a second-draw PPP loan must:

  • Employ not more than 300 full-time, part-time, or seasonal employees; if you have multiple locations, you may not have more than 300 employees per location.

  • Demonstrate at least a 25% reduction in gross receipts in the first, second, or third quarter of 2020 relative to the same 2019 quarter. Applications submitted on or after January 1, 2021 are eligible to use the gross receipts from the fourth quarter of 2020. 

  • Have already or will use the full amount of your first-draw PPP loan.

  • Have been operational before February 15, 2020 and remain operational (meaning: either had employees for whom they paid salaries and payroll taxes for, OR paid independent contractors (as reported on a Form 1099-MISC) as of Feb 15, 2020).

Are there any additional eligibility requirements for first or second draw borrowers? 

Regardless of first or second draw, eligible entities must be:

  • businesses,
  • certain non-profit organizations,
  • housing cooperatives,
  • veterans’ organizations, tribal businesses,
  • self-employed individuals,
  • sole proprietors,
  • independent contractors,
  • and small agricultural co-operatives.

For second-draw, eligibility has been expanded for 501(c)(6) organizations to receive a Paycheck Protection Program loan if: 

  • The organization does not receive more than 15 percent of receipts from lobbying;
  • The lobbying activities do not comprise more than 15 percent of activities;
  • The cost of lobbying activities of the organization did not exceed $1,000,000 during the most recent tax year that ended prior to February 15, 2020 and 
  • The organization has 300 or fewer employees. 

Ineligible entities include:

  • Entities listed in 13 C.F.R. 120.110 and subsequent regulations except for entities from that regulation which have otherwise been made eligible by statute or guidance, and except for nonprofits and religious organizations;
  • Entities involved in political and lobbying activities including engaging in advocacy in areas such as public policy or political strategy or otherwise describes itself as a think tank in any public document,
  • Entities affiliated with entities in the People’s Republic of China or Hong Kong,
  • Entities who have a member on their board of directors that is a resident of the People’s Republic of China;
  • Registrants under the Foreign Agents Registration Act;
  • and entities that receive a grant under the Shuttered Venue Operator Grant program.

 

Methods and calculation

What did Gusto change in the newest report? Which one should I use?

January 19th, the U.S. Treasury published an updated FAQ including details for calculating max loan amounts for the PPP loan. All employee federal taxes imposed or withheld during the lookback period will now be included for loan estimation purposes. Gusto’s PPP report is reflecting these changes as of 2:30pm PST on January 19th, 2021. Previously we were excluding all employee federal taxes imposed or withheld after February 15, 2020 per our understanding of the Interim Rule. We’d recommend that you use our most up-to-date report for your PPP loan application as it is consistent with those new guidelines.

Why did Gusto update their methodology?

This situation is incredibly fluid and we are reacting in real-time to changing guidance. We want to ensure that our customers are submitting applications that will get approved by their lender.

What do I do if I already gave my lender my PPP report?

Check in with your lender. If your lender requests a report reflecting the new guidance, simply sign in to Gusto and download the new report as of 1/19/21, 2:30pm PST.

What period of time should I use to determine my average monthly payroll costs?

Employers need to select a pay period in order to determine average monthly payroll costs.

  • Regular businesses that don't fall into either category above can either select the 2019-calendar year (e.g., Jan 1 - Dec 31, 2019), the 2020-calendar year, or the 1-year period prior to the date that the loan will be dispersed in 2021. We recommend you use full months in your selection. We've defaulted to calendar year 2019, as this has been recommended by the AICPA-led small business funding coalition. We're aware of inconsistent guidance on what look-back period should be used, so you can customize it based on your CPA or PPP lender's recommendation.
  • Newly formed businesses (i.e., companies that weren’t in business by Feb 15, 2019) should select a period spanning the beginning of the business until Feb 15, 2020.
  • Seasonal businesses are defined as those operating for no more than 7 months in a year or earning no more than 1/3 of gross receipts in any 6 months in comparison to the other 6 months in that year. If you meet this definition, you can select any 12-week period between Feb 15, 2019 - Feb 15, 2020.

How did you calculate my average monthly payroll costs?

Step one: Calculate “Gross Payroll” in a given month. This is the total dollar amount you paid to or on behalf of full-time and part-time employees.

This includes:

  • Salary, wages, commissions, tips, and bonuses, including severance pay.
  • Owner’s Draw compensation only if the employer is a sole proprietorship.
  • Any paid leave paid out during the time period (no FFCRA paid leave).
  • Employee-paid state and local taxes.
  • Employee-paid Group Health Benefits contributions.
  • Employee-paid Retirement contributions.
  • Federal taxes paid by your employees, which includes:
    • FIT (Federal Income Tax)
    • Employee-share of FICA (Social Security & Medicare)

Step two: Apply the $100k salary cap for highly compensated employees and sole proprietors. 

  • When calculating a PPP loan amount, you can’t include any annualized, employee compensation (including owner’s draws for sole proprietors) that is in excess of$100k (for purposes of this calculation, we’ll refer to this rule as the “salary cap” and to those who hit it as “highly compensated employees”).
  • Gusto has implemented the salary cap by counting all Gross Payroll of highly compensated employees each month until each highly compensated employee has received $100k in annualized pay. Once they’ve received $100k in Gross Payroll, we won’t include any Gross Payroll for that employee for the remainder of the year.
  • Ex: If a highly compensated employee receives $100k by April of each year, you’ll see a drop in Earnings in the PPP Report starting in April or May and for the remainder of the lookback period.
  • Tip: We have listed at the bottom of the report all of your highly compensated employees whose Gross Payroll became subject to the $100k salary cap.

Step three: Add employer-paid state and local taxes, retirement contributions, and employer-paid benefits contributions to find each month’s Monthly Payroll Cost. 

  • Add employer-paid state and local taxes. 
  • Add employer-paid benefits contributions for group health plans, dental and vision plans, and health FSAs. (This does not include HSAs, Group Term Life Plans, or Long-Term and Short-Term Disability Plans). 
  • Add employer-paid retirement contributions.

You now have your Monthly Payroll Cost for a given month.

Step four: Calculate your Average Monthly Payroll Cost.

  • Find the sum of all your Monthly Payroll Costs in the given period and divide that sum by the number of months in the lookback period to determine the Average Monthly Payroll Cost (e.g. if your lookback period is 2019, divide your sum total of Monthly Payroll Costs by 12 to find your Average Monthly Payroll Cost).

What costs are not eligible as Payroll Costs?

  • Contractor pay
  • Payroll reimbursements 
  • Owner’s draw compensation (except for sole proprietors) 
  • Workers’ compensation fees
  • Fringe benefits (e.g., commuter benefits, HSAs)

What other forms may I need to provide?

While each bank or lender will have their own process, some documents and/or tax filings that your lender might request are listed below.

Forms available in Gusto:

Documents and/or tax filing that your lender may request

Where you can find it in Gusto

Statements listing eligible payroll costs during the applicable look back period.

In your PPP Payroll report, under the COVID-19 and Reports sections of your Gusto account.

IRS Form 941

used by employers to report quarterly wages, and federal employment taxes 

For 2019 and 2020: for historical quarters that were filed by Gusto, you will find copies of your 941 (and any amended/corrected 941s) under the Documents tab in your Gusto account.

IRS Form 940

used to report annual Federal Unemployment Tax Act (FUTA) tax.

If Gusto filed your 2019 or will be filing your 2020 annual filings, you will find a copy of your IRS Form 940 under the Documents tab in your Gusto account. 

Note: Your 2020 Form 940 isn’t due to be filed until January 31, 2021.

IRS Form 944

Employer’s Annual Federal Tax Return, used by qualifying small employers (those whose annual liability for federal withholding is $1,000 or less) to file and pay taxes once per year.

If Gusto filed your 2019 annual filings, and you qualify to file the annual Form 944 instead of the quarterly Form 941, you will find a copy of your IRS Form 944 under the Documents tab in your Gusto account. 

Note: Your 2020 Form 944 isn’t due to be filed until January 31, 2021. Also, if an annual Form 944 was filed for your business, you are not required to file a quarterly Form 941.

IRS Form 1099-MISC

Miscellaneous Income, used to report payments made in the course of a trade or business to a person who’s not an employee. 

For companies that paid contractors: If Gusto filed your 2019 annual filings you will find a copy of the 1099-MISC forms issued to your contractors under Documents, on the Company tab in your Gusto account. 

For contractors of Gusto customers: If Gusto filed your 2019 or will be filing your 2020 information returns to the IRS, you will find a copy of your 1099-MISC forms under Documents in your Gusto account. If you haven’t set up your profile in Gusto, please contact the company directly for a copy of your 1099-MISC.

IRS Form W-3

“Transmittal of Wage and Tax Statements” used by customers to send information about employee wages.

If Gusto filed your 2019 or will be filing your 2020 annual filings you will find a copy of the W-2 and W-3 forms under Documents, on the Company tab in your Gusto account. Scroll to page 2, or beneath the cover page, and Form W-3 will be available.

NOT available in Gusto

Business information such as your legal name, primary business address, business Employer Identification Number, etc.

While these are not technically available on Gusto, you can go to your Gusto dashboard under the Documents section, click Company and pull up your Direct Deposit Authorization document. You can use this as a source to complete most of that information.

Suggested documents for Sole Proprietors 

 

To expedite the process, we recommend having ready your:

  • Net income reported on your Schedule C (line 31) of your 2019 personal income tax return. If you haven’t filed your 2019 tax returns, a prepared Schedule C that has not yet been filed yet should be sufficient. If you have not prepared a 2019 Schedule C, it is recommended that your lender accept your filed 2018 1040 Schedule C. 
  • Proof of healthcare and retirement benefits costs
  • Documentation of self-employed status in 2019 such as a 2019 Form 1099-MISC (box 7), invoice, bank statement or other documentation of self-employed status as of Feb. 15, 2020, such as an invoice or bank statement. 
  • If you have employees, provide your Paycheck Protection Program report for the period including Feb. 15, 2020.
  • Information regarding any Economic Injury Disaster Loans (EIDL) made between January 31, 2020 and April 3, 2020 that you seek to refinance and any advances under an EIDL COVID-19 loan (because it does not have to be repaid). 
Suggested documents for Partnerships and LLCs filing taxes as a partnership Your self employment income can be located on each partners’ Schedule K-1, or Line 14 of Form 1065 (Schedule K) for 2019.

Any guidance or information we've provided for the purposes of applying for a loan under the Small Business Administration's Paycheck Protection Program ("PPP") is for informational purposes only. Our guidance is based on Treasury Guidance as published on January 8, which may become outdated.

Payroll, benefits, HR and more.