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Bank Says do it this way - I will but I don't think it is correct


BulldogTom

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Working with the bank on the PPP forgiveness application.   We are electing an alternative covered period as the disbursement date landed the day before the next regular bi-weekly payroll period began.   Loan disbursed on 5/7/20, first day of the alternative period is 5/8/20 and last day of the alternative period is 10/22/20.   On 5/14 payroll for the week ending 5/7/20 was paid to the employees, but it was for wages incurred before the covered period began.   So we excluded it from the calculation.   On 10/29/20, payroll was paid for the pay period ending 10/22/20.   We included it in the calculation as incurred cost paid on the next regularly scheduled payroll date.

The bank says we don't need to exclude the payroll checks cut on 5/14/20.   They say we get that payroll as well as the incurred but not paid in the covered period payroll that was paid on 10/29/20.   Seems to me they are giving me too much payroll.

It does not matter, because there is enough either way to cover the full amount of the loan, so I am not sweating it.   But this interpretation by the bank seems very generous.   I thought you got one or the other, either paid in the covered period or incurred in the covered period.   Maybe I was wrong in my understanding.

Tom
Modesto, CA

 

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49 minutes ago, BulldogTom said:

 

The bank says we don't need to exclude the payroll checks cut on 5/14/20.   They say we get that payroll as well as the incurred but not paid in the covered period payroll that was paid on 10/29/20.   Seems to me they are giving me too much payroll.

It does not matter, because there is enough either way to cover the full amount of the loan, so I am not sweating it.   But this interpretation by the bank seems very generous.   I thought you got one or the other, either paid in the covered period or incurred in the covered period.   Maybe I was wrong in my understanding.

Tom
Modesto, CA

 

Based on the online CPE classes that I took, your banks interpretation is correct. My largest client with a semimonthly payroll had a pay date which fell

on the first day of their PPP allowable window. I specifically asked 2 different presenters whether these were allowable payroll expenses.

Both presenters said the way the rules were written and are being interpreted that my clients paychecks dated the first day of their allowable expense window

which was April 16th were definitely allowable payroll expenses along with the related state employment taxes.

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Copied from the SBA Website:

Loan Forgiveness Payroll Costs FAQs


1. Question: Are payroll costs that were incurred during the Covered Period2 or the Alternative Payroll Covered Period3 but paid after the Covered Period or the Alternative Payroll Covered Period eligible for Loan Foregiveness?

Answer: Yes, if the payroll costs are paid on or before the next regular payroll date after the Covered Period or Alternative Payroll Covered Period.


Example: A borrower received its loan before June 5, 2020 and elects to use a 24-week Covered Period. The borrower’s Covered Period runs from Monday, April 20 through Sunday, October 4. The borrower has a biweekly payroll cycle, with a pay period ending on Sunday, October 4. However, the borrower will not make the corresponding payroll payment until the next regular payroll date of Friday, October 9. Under these circumstances, the borrower incurred payroll costs during the Covered Period and may seek loan forgiveness for the payroll costs paid on October 9 because the cost was incurred during the Covered Period and payment was made on the first regular payroll date after the Covered Period.


2. Question: Are payroll costs that were incurred before the Covered Period but paid during the Covered Period eligible for loan forgiveness?


Answer: Yes.
Example: A borrower received its loan before June 5, 2020 and elects to use a 24-week Covered Period. The borrower’s Covered Period runs from Monday, April 20 through Sunday, October 4. The borrower has a biweekly payroll cycle, with a payroll cycle ending on Saturday, April 18. The borrower will not make the corresponding payroll payment until Friday, April 24. While these payroll costs were not incurred during the Covered Period, they were paid during the Covered Period and are therefore eligible for loan forgiveness.

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