Should I Put My PPP Funds In A Separate Account?

What is forgivable under PPP?

The Paycheck Protection Program (PPP) provides forgivable loans to small businesses to help cover up to 24 weeks of payroll costs, interest on mortgages, rent, and utilities..

What is the 24 week period for PPP?

Expanding to 24 weeks, from eight weeks, the covered period during which PPP loan recipients can spend the funds and still qualify for loan forgiveness. The 24-week period applies to all loans made on or after June 5. Borrowers that received loans before June 5 can choose to elect an eight-week period.

What if I made a mistake on my PPP application?

Guidance on PPP loans has been a whirlwind to say the least. … Basically you can go back to the bank and amend your PPP application to include the partners compensation and the bank will fund that additional amount.

How do you handle PPP funds?

Smart Ways to manage your PPP funds Open a separate account for the money you’re receiving. Pay all of your eligible, forgivable expenses from this account. Keep things separate from the beginning to prevent having to document and delineate all the expenses later on.

How do I make sure my PPP is forgiven?

Use the following tips on how to make sure your PPP loan is forgiven to get started:Use it for eligible expenses.Keep your employee headcount up.Don’t reduce an employee’s wages by more than 25%Document everything.Talk with your lender.Apply for loan forgiveness.

Which is better PPP or EIDL?

EIDL has a higher interest rate than PPP (3.75% vs. … You cannot use an EIDL for the same purpose as a PPP loan (payroll in the two months after receiving the loan). However, you can use the EIDL for payroll once you’ve exhausted the PPP after those two months have passed.

When should I apply for PPP forgiveness?

Similar to the point about FTE count above, you want to apply for forgiveness when your employees’ salaries or hourly wages are at a high point compared to pre-COVID levels in order to minimize the potential reduction in forgiveness to meet Safe Harbor.

How long do you have to apply for PPP forgiveness?

Currently, borrowers can request a covered period of 8 or 24 weeks. New regulations were passed to allow borrowers to file for forgiveness before the end of the covered period to give business owners more freedom to document their expenses.

Can I transfer PPP funds to another bank?

If your loan is in a separate bank account Then, transfer the appropriate PPP loan funds from your PPP account to your regular bank account to cover them. Your first journal entry will debit the appropriate expense account (e.g., Payroll, Mortgage Interest, Rent, or Utility).

What documents are needed for PPP forgiveness?

Documentation Needed for PPP Loan Forgiveness Documentation verifying the number of employees on payroll and pay rates—including IRS payroll tax filings and state income, payroll, and unemployment insurance filings. Documentation verifying payments on covered mortgage obligations, lease obligations, and utilities.

Will the PPP loan be forgiven?

Forgiveness for self-employed individuals You are eligible to claim 2.5 months’ worth of your 2019 net profit to replace pay. If you didn’t have any other payroll expenses factoring into your PPP loan amount, this means that your entire PPP loan could be forgiven for the 24-week period.

What happens if you don’t use all your PPP loan?

Any excess paid to an owner-employee is eligible use of PPP funds but will not be forgivable. Q) If you don’t use 75% of the loan proceeds on payroll does that mean none of the loan will be forgiven or will you at least get the money you spent on payroll forgiven? A) Partial loan forgiveness.

Do I have to rehire the same employees PPP?

The PPP is designed to help employers impacted by the pandemic continue to pay their employees whether or not their business is open or their employees are working. … A business does not have to rehire the same employee, but it has to have the same number of employees it had prior to Feb. 15.

What is the covered period for PPP?

Covered Period: The Covered Period is either (1) the 24-week (168-day) period beginning on the PPP Loan Disbursement Date, or (2) if the Borrower received its PPP loan before June 5, 2020, the Borrower may elect to use an eight-week (56-day) Covered Period.