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schirallicpa

are family members on the payroll ok for PPP

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In my neck of the woods, hiring your children is sometimes the only people you can get to work!

If an employer hires his child (over 18) or other family member, and that person is getting a legitimate paycheck and W2, is it okay for purposes of loan forgiveness, or does this need to be "arms length"?

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Yes, I have a client who got PPP with his spouse/employee W2 income and the 2.5 months of his Schedule C income.   The bank had no issue with the spouse W2 income as the only payroll expense.   

Tom
Modesto, CA

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You don't have to hire anyone new, family or not, for forgiveness. You just have to keep the same number of FTEs within allowable ranges and salaries. If employees choose not to return, just confirm that; or if you can't open up fully (a restaurant allowed only 50% seating, for example), you don't need all your employees for forgiveness. You can employ family, for the loan application or for forgiveness. Just don't go randomly raising owner salaries with PPP funds.

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Are you not suppose to have same employee/payroll as you had on 02/15 or at least good faith effort should be made to retain them. Is hiring new employee OK after getting PPP loan ?

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Your client can hire new employees. He may have employees who choose not to return. He doesn't have to have the same exact employees; but if he does, don''t cut their salaries without a business reason (can't open fully, etc.) Work through the forgiveness application and instructions, even though it might change again. See the safe harbors, such as what percentage drop in FTE &/or salary won't reduce forgiveness, alternate comparison dates, etc. Does your client have other allowable expenses to make up to 40% of the loan? Compare a small drop in forgiveness/loan at 1% for 5 years vs hiring an unnecessary employee.

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