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PPP Forgiveness and Tips - what is the theory behind this?


BulldogTom

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At my day job, our employees receive tips.  When I put together a draft of our PPP Loan Forgiveness Application, I excluded the cash tips reported by the employees, under the theory that the company did not pay those tips to the employees.   I sent my work over to our outside CPA firm and they questioned my calculations.   They sent me some material from Spidell (who I have the greatest respect for) showing that cash tips should be included in the amount of payroll to include on the forgiveness application.   I am not questioning the CPA or Spidell, I am just trying to wrap my head around why an amount that was not paid by the employer, but by the customers, would be allowed in the calculation for forgiveness?   

Thanks for all responses.

Tom
Modesto, CA

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I understand your reasoning, Tom.  But the point of the PPP loan was to continue payments to employees so they did not wind up getting the enhanced unemployment benefit.  Therefore, the tips were part of what they were getting and counted towards their earnings, and towards the loan forgiveness for their employers.  At least, that would be how I would justify it.  Congress may have reasoned differently. 

 

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I agree with Gail.  If the PPP were simply a loan to the employer, there would be no basis for including employee tips.  But the overarching purpose of the PPP (combined with the anticipated loan forgiveness), was an attempt to make employees whole without being too financially burdensome on the employer. And of course to keep them off the unemployment rolls, which somewhat reduced the total unemployment numbers and tried to avoid "windfall" claims.  Although I'm not sure that last part was achieved. 

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