By Jennifer Hart 

Overview

  • The application for forgiveness requires borrowers to submit significant documentation supporting their uses of the PPP loan funds.
  • In addition to bank account statements and and payroll reports, borrowers will be required to save documentation relating to their good faith certification that the loan was necessary to support ongoing operations.
  • Borrowers should start preparing now to gather the documentation that will be required when they submit their forgiveness applications.
  • See also “PPP Loan Forgiveness Application Released.”

PPP Forgiveness Documentation

The Paycheck Protection Program’s application for forgiveness requires a significant amount of documentation supporting the request. The documentation includes support for the payment of both payroll and non-payroll costs, proof of employee headcount (including written correspondence with employees who refuse to return to work) and records relating to the application for the PPP Loan.  

Borrowers should start preparing now for their forgiveness applications and maintain clean records of their uses of the PPP Loan funds. Here’s the documentation you’ll need to submit and also the documentation you’ll need to maintain for six years after the loan is forgiven.  


What documentation does a borrower need to 
submit to support its payroll costs? 

The borrower needs to submit documentation verifying the amounts paid for cash compensation and non-cash benefit payments during the covered period including 

  • Bank account statements or third-party payroll service provider reports documenting the amount of cash compensation paid to employees 
  • Tax forms or equivalent third-party payroll service provider reports for eight weeks after the loan was disbursed, including Form 941 or other payroll tax filings reported to the IRS and state quarterly business and individual employee wage reporting and unemployment insurance tax filings reported to the relevant state 
  • Payment receipts, cancelled checks or account statements documenting the amount of any employer contributions to employee health insurance and retirement plans that for which the borrower requested forgiveness 


What documentation does a borrower need to submit to support its 
FTE count for purposes of forgiveness reduction (if applicable)?  

Borrowers will need to submit documentation supporting their FTE during the measurement period of their choice. The documentation must show the average number of FTE employees on payroll per month employed by the borrower. This documentation includeForm 941 or other payroll tax filings made to the IRS (whether reported or to be reported) and state quarterly business and individual employee wage reporting and unemployment insurance tax filings made to the relevant state (whether reported or to be reported). Documents may cover periods longer than the relevant time period. 

The time periods that aemployer can choose between are: 

  • Feb. 15, 2019 and June 30, 2019; and 
  • Jan. 1, 2020 and Feb. 29, 2020 

Seasonal employers can choose between: 

  • Feb. 15, 2019 and June 30, 2019;  
  • Jan. 1, 2020 and Feb. 29, 2020; or  
  • any consecutive 12-week period between May 1, 2019 and Sept. 15, 2019.  


What documentation is needed to support the payment of n
on-payroll expenses 

Non-payroll expenses include mortgage interest, rent and utilities. The borrower must submit documentation that verifies the existence of the obligations or services prior to Feb. 15, 2020 and the eligible payments made during the eight weeks after the loan funds were received.

  • For business mortgage interest payments: a copy of the lender amortization schedule and receipts or canceled checks for the payments or lender account statements from Feb. 2020, the months during the eight-week period, and the month after the eight-week period. 
  • For business rent or lease payments: a copy of the current lease agreement and receipts or canceled checks verifying payments from the Covered Period; or lessor account statements from Feb. 2020, the months during the eight-week period and the month after the eight-week period. 
  • For utilities: a copy of invoices from Feb. 2020, the invoices for amounts paid during the Covered Period along with receipts, canceled checks or account statements of the payments.  


Are there other documents that a borrower must keep but not submit?
 

Yes. The borrower must keep significant documentation in their files for six years after the date the loan is forgiven or repaid in full. Borrowers must also allow authorized representatives of SBA, including representatives of its Office of Inspector General, to access these files upon requestHere are the documents borrowers must save: 

  • The PPP Schedule A Worksheet or its equivalent and documentation supporting the list of employees on the Schedule A worksheets for total cash compensation and cash compensation in excess of $100,000 during 2019. 
  • Documentation regarding any employee job offers and refusals, firings for cause, voluntary resignations and written requests by any employee for reductions in work schedule. 
  • Documentation supporting the “FTE Reduction Safe Harbor.”  
  • All records relating to the borrower’s PPP loan, including any documentation: 
    • submitted with the original PPP loan application 
    • supporting the certifications on the application that the loan was necessary  
    • demonstrating the borrower was eligible for a PPP loan 
    • needed to support the forgiveness application materials 
    • demonstrating the borrower’s material compliance with PPP requirements. 

The documentation that the loan was necessary and that the certification of necessity was made in good faith will be especially important for borrowers whose loans total more than $2 million and are subject to mandatory audit. Borrowers with loans under $2 million who automatically qualify for the safe harbor announced on May 13 that they are deemed to meet the necessity requirement should nonetheless maintain this documentation.

For questions about the PPP Loan program or compliance with the documentation requirements, contact Jennifer Hart at jmh@kjk.com or 216.736.7208 or Cary Zimmerman at caz@kjk.com or 216.736.7275.  

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