Many Paycheck Protection Program (PPP) loan recipients are in the process of spending down their loan proceeds. Now, these businesses are likely turning toward unpacking the details of how they can maximize their loan forgiveness entitlement.
The Small Business Administration (SBA) and U.S. Treasury Department have released substantial guidance to help organizations understand whether they will be eligible for loan forgiveness and how to calculate the amount that can be forgiven. For owner-employees, some of that guidance will work in their favor, while other aspects of the interim final rule might come as a surprise to those who didn't anticipate having trouble qualifying for loan forgiveness.
|Owner-Employee Compensation Rule
Loan forgiveness for owner-employee compensation is more limited than in the case of wage payments made to traditional employees. Assuming the loan recipient uses a 24-week "covered period," loan forgiveness on payments to owner-employees is limited to the lesser of $20,833 (2.5 months of a $100,000 annual salary); or the owner's 2019 compensation multiplied by 2.5/12.
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Robert Bloink
Robert Bloink, Esq., LL.M., has taught at the Texas A&M University School of Law and the Thomas Jefferson School of Law; in the past decade, Bloink has initiated $2B+ in insurance & alternative asset class portfolios, and previously served as a senior attorney in the IRS Office of Chief Counsel for the Large- and Mid-Sized Business Division. Bloink is also the co-author of Tax Facts, a reference solution that helps to answer critical tax questions and provides the latest tax developments.
William H. Byrnes
William Byrnes, Esq., LL.M., CWM, is an executive professor and associate dean of special projects at the Texas A&M University School of Law. A pioneer of online legal education, he also is the author or co-author of 20 tax books and legal treatises. Byrnes is also the co-author of Tax Facts, a reference solution that helps to answer critical tax questions and provides the latest tax developments.
