There are four parts to the regular PPP loan forgiveness application. For this article we will be covering the Schedule A Worksheet and Schedule A:
- Schedule A Worksheet
- Schedule A
- Loan Forgiveness Calculation Form
- Borrower Certifications
It makes sense to want to start at the beginning of the application. However, we recommend you start with the Schedule A Worksheet, found on Page 4 of the application. It is out of order, but to complete the first portion of the app, you need the Schedule A information. The application can be a lot. It might take some time to collect information and make sure your calculations are correct. But we will be with you, holding your hand along the way. All right, let’s conquer this monster.
PPP Schedule A Worksheet
The best way to approach this would be to copy the tables in the Schedule A worksheet in a spreadsheet. This will help you keep organized and track of your payroll numbers and information. You’ll need to calculate information about employees’ hours and wages in order to plug that information back into the application.
Table 1: List employees who:
- Were employed by you at any point during the covered period or the alternative payroll covered period whose principal place of residence is in the United States; and
- Received compensation from you at an annualized rate of less than or equal to $100,000 for all pay periods in 2019 or were not employed by you at any point in 2019. (Note: Other employees will be in the next table.)
For this article, we will be using an imaginary company called 4Example Co. to help showcase the steps necessary to complete the Schedule A Worksheet. 4Example Co. has 2 employees one is on salary and the other is paid hourly.
After entering their full name, last four of their Social Security, and Cash Compensation for the covered period, we’ll calculate their Average FTE.
Employee #1 works over 40 hrs a week, so automatically that is 1.0 FTE.
Employee #2 works less than 40 hrs. That calculation is:
0.75 = 0.8 (rounded to the nearest tenth)
Employee’s Name: Here you list each employee’s name. Do not include any independent contractors, owner-employees, self-employed individuals, or partners.
Employee Identifier: This is the last four digits of their Social Security numbers.
Enter Cash Compensation:
Enter the sum of gross salary, gross wages, gross tips, gross commissions, paid leave (vacation, family, medical or sick leave, not including leave covered by the Families First Coronavirus Response Act
), and allowances for dismissal or separation paid or incurred during the covered period or the alternative payroll covered period.
Average FTE: You need to calculate average FTE (full-time equivalent) for the covered period or the alternative payroll covered period for each employee included in this table.
How to calculate the average FTE:
Average FTE: There are two simple ways to complete this:
- Simplified Method: Fill in 1.0 FTE if the employee worked 40 hours a week (or more). For your employees who worked less than 40 hours per week, assign them 0.5 FTE.
- Alternate Method: Take the employee’s average number of hours worked per week and divide that number by 40. Then round to the nearest tenth.
Note: No individual employee can be more than 1.0 FTE. That means, even if your employee works 45 hours per week, their FTE is still capped at 1.0.
Salary/Hourly Wage Reduction: If you reduced salary or wages at all, you’ll want to walk through these calculations to figure out if it was more than 25%. If you didn’t reduce the employee’s salary or hourly wage, you’d put zero.
For each employee listed in Table 1, complete the following (using salary for salaried employees and hourly wage for hourly employees):
Step 1. Determine if pay was reduced more than 25%.
- Enter average annual salary or hourly wage during the covered period or the alternative payroll covered period. This is their actual wahr rate and not the total amount you paid them.
- Enter average annual salary or hourly wage between January 1, 2020 and March 31, 2020: ______________.
- Divide the value entered in 1a by 1b: ______________.
- If 1c is 0.75 or more, enter zero in the column above box 3 for that employee (note: this is the column titled Salary / Hourly Wage Reduction); otherwise proceed to Step 2.
Example for salaried employees:
- You paid your employee an average salary of $39,000 during the covered period.
- In the first quarter of 2020 you paid your employee an average salary of $57,000.
- $39,000 / $57,000 = 0.68
- Continue on to Step 2, since you did not reduce your employee's salary by more than 25%.
Example for hourly employees:
- You paid your employee a hourly wage of of $17 during the covered period.
- In the first quarter of 2020 you paid your employee an average salary of $21.
- $17/21 = 0.80
- Continue on to Step 2.
- Enter the annual salary or hourly wage as of February 15, 2020: ______________.
- Enter the average annual salary or hourly wage between February 15, 2020 and April 26, 2020: ______________.
- If 2b is equal to or greater than 2a, skip to Step 3. Otherwise, proceed to 2c.
- Enter the average annual salary or hourly wage as the earlier of December 31, 2020 and the date this application is submitted: ______________.
- If 2c is equal to or greater than 2a, the Salary/Hourly Wage Reduction Safe Harbor has been met – enter zero in the column above box 3 for that employee.
Example for salaried employees:
- Your employee’s average salary as of February 15, 2020 was $57,000.
- Your employee’s average salary between February 15, 2020 and April 26, 2020 was $45,000.
- $45,000 (B) is not equal to or greater than $57,000 (A). Continue onto C.
- Your employee’s average salary as of December 31, 2020 is $50,000.
- $50,000 (C) is less than $57,000 (A). The safe harbor hasn’t been met and you need to move to Step 3.
Step 3: Determine the Salary/Hourly Wage Reduction.
- Multiply the amount entered in 1b by 0.75: ______________.
- Subtract the amount entered in 1a from 3a : ______________.
If the employee is an hourly worker, compute the total dollar amount of the reduction that exceeds 25% as follows:
- Enter the average number of hours worked per week between January 1, 2020 and March 31, 2020: ______________.
- Multiply the amount entered in 3b by the amount entered in 3c. Then multiply this amount by 24 (if the borrower is using a 24-week covered period) or 8 (if the borrower is using an 8-week covered period): ______________.
Enter this value in the column above box 3 for that employee in the salary/hourly wage reduction column.
If the employee is a salaried worker, compute the total dollar amount of the reduction that exceeds 25% as follows:
- Multiply the amount entered in 3.b. by 24 (if borrower is using a 24-week covered period) or 8 (if borrower is using an 8-week covered period): ______________.
- Divide this amount by 52: ______________.
Enter this value in the column above box 3 for that employee.
Boxes 1 through 3 Totals: Enter the sum of the amounts in each column:
- Cash Compensation
- Average FTE
- Salary/Hourly Wage Reduction
If you’ve made it this far, you have completed Table 1 on the PPP Schedule A Worksheet. Congratulations!
Example for salaried employees:
During the covered period, your employee's average salary was $39,000 (Step 1a). In the first quarter of the year, their salary was $57,000 (Step 1b). For this example, you’re using the eight-week covered period.
A. Step 1b x 0.75
$57,000 x 0.75 = $42,750
B. Step 3a– Step 1a
$42,750 – $39,000 = $3,750
E. Step 3b x 8 = Step 3e
Step 3E / 52 = Salary/hourly wage reduction
$3,750 x 8 = $30,000
$30,000 / 52 = $576.92
You will put $576.92 in the salary/hourly wage reduction column.
Example for hourly employees:
During the covered period of 24-weeks, your employee’s hourly wage was $16 (Step 1a). Their average hourly wage in the first quarter of the year was $24 (Step 1b). Reminder you are using the 24-week covered period.
A. Step 1b x 0.75
$24 x 0.75 = $18
B. Step 1a – Step 3a
$18 – $16 = $2
C. Average hours worked per week during the forgiveness period: 30
D. Step 3b x Step 3c = Step 3d
Multiply Step 3d by the 24-week covered period.
$2 x 30 = $60
$60 x 24 = $1,440
You will put $1,440 in the salary/hourly wage reduction column.
In Table 1, under the box titled: “FTE Reduction Exceptions” is essentially where you identify employees who could not or would not return to work so you (ideally) won’t be penalized with a reduction in forgiveness.
FTE Reductions Exceptions:
- Any positions for which the Borrower made a good-faith, written offer to rehire an individual who was an employee on February 15, 2020 and the Borrower was unable to hire similarly qualified employees for unfilled positions on or before December 31, 2020;
- Any positions for which the Borrower made a good-faith, written offer to restore any reduction in hours, at the same salary or wages, during the Covered Period or the Alternative Covered Period and the employee rejected the offer, and
- Any employees who during the Covered Period or the Alternative Payroll Covered Period (a) were fired for cause, (b) voluntarily resigned, or (c) voluntarily requested and received a reduction of their hours.
- In all of these cases, include these FTEs on this line only if the position was not filled by a new employee. Any FTE reductions in these cases do not reduce the borrower’s loan forgiveness.
Final totals and numbers, if you did not have any FTE Reductions:
Now let’s fill out Table 2. We’ve bolded a few key items to make sure you read them carefully.
Table 2: List employees who:
- Were employed by the borrower at any point during the covered period or the alternative payroll covered period whose principal place of residence is in the United States; and
- Received compensation from the Borrower at an annualized rate of more than $100,000 for any pay period in 2019.
Remember, you are entering the cash compensation during the covered period or the alternative payroll covered period. For each individual employee, the total amount of cash compensation eligible for forgiveness may not exceed an annual salary of $100,000, as prorated for the covered period; therefore, do not enter more than $15,385 if using the 8-week covered period or $46,154 if using the 24-week covered period in Table 1 or Table 2 for any individual employee. This is outlined in the SBA guidelines here.
Similarly for the Average FTE, remember this calculates the average full-time equivalency (FTE) during the covered period or the alternative payroll covered period.
Now you have completed the PPP Schedule A Worksheet. Congratulations!
Complete Your Schedule A
The Schedule A form can be found on page 3. From your worksheet you will have the totals to fill in the information.
Line 4 and 5 are from the Worksheet’s Table 2 totals.
Non-Cash Compensation Payroll Costs During the Covered Period or the Alternative Payroll Covered Period
Line 6: Total amount paid by Borrower for employer contributions for employee health insurance. Enter the total amount paid by the Borrower for employer contributions for employee health insurance, including:
- Employer contributions to a self-insured health plan
- Employer-sponsored group health plan, but excluding any pre-tax or after tax contributions by employees.
- Do not add employer health insurance contributions made on behalf of a self-employed individual, general partners, or owner-employees of an S-corporation, because such payments are already included in their compensation.
Line 7: Total amount paid by Borrower for employer contributions to employee retirement plans:
- Enter the total amount paid by the borrower for employer contributions to employee retirement plans, excluding any pre-tax or after-tax contributions by employees. Do not add employer retirement contributions made on behalf of a self-employed individual or general partners, because such payments are already included in their compensation.
Line 8: Total amount paid by borrower for employer state and local taxes assessed on employee compensation: ___________________.
- Enter the total amount paid by the borrower for employer state and local taxes assessed on employee compensation (e.g., state unemployment insurance tax); do not list any taxes withheld from employee earnings.
These additional payroll costs may be included in the calculations for forgiveness purposes.
Compensation to Owners
Line 9: Total amount paid to owner-employees/self-employed individual/general partners:
- If a 24-week Covered Period applies, for any owner-employee or self-employed individual/general partner, salary is capped at $20,833 per individual; and
- If the Borrower has elected an 8-week Covered Period, for any owner-employee or self-employed individual/general partner, salary capped at $15,385 per individual.
Total Payroll Costs Line
Line 10: Payroll Costs (add lines 1, 4, 6, 7, 8, and 9). This figure will also go on line 1 of the PPP Loan Forgiveness Calculation Form.
Full-Time Equivalency (FTE) Reduction Calculation
If you satisfy any of the following three criteria, check the appropriate box, skip lines 11 and 12, and enter 1.0 on line 13; otherwise, complete lines 11, 12, and 13:
- No reduction in employees or average paid hours. This means if you did not cut or reduce employee number or hours, check the box and continue to Line 13. Enter 1.0 on Line 13.
- FTE Reduction Safe Harbor 1: If you were unable to operate between February 15, 2020, and the end of the Covered Period at the same level of business activity as before February 15, 2020 due to compliance of restrictions due to COVID-19, check the box and enter 1.0 on Line 13.
- FTE Reduction Safe Harbor 2: If you satisfy FTE Reduction Safe Harbor 2 (see PPP Schedule A Worksheet), check here the box and proceed to Line 13.
If none of the above criteria are met, continue to Line 11.
Line 11: Average FTE during the Borrower’s chosen reference period. Please see guidance on the reference periods here.
Line 12: Total Average FTE (add lines 2 and 5).
Remember Line 2 is based on Average FTE (Box 2) from PPP Schedule A Worksheet, Table 1 while Line 5 is Average FTE (Box 5) from PPP Schedule A Worksheet, Table 2.
Line 13. FTE Reduction Quotient (divide line 12 by line 11) or enter 1.0 if FTE Safe Harbor is met.
Divide line 12 by line 11 (or enter 1.0 if the FTE Reduction Safe Harbor has been met, according to PPP Schedule A Worksheet—FTE Reduction Safe Harbor). If more than 1.0, enter 1.0. You’ll enter this amount on line 7 of the Loan Forgiveness Calculation Form when we get there.
Want to make sure you are filling out your loan forgiveness application correctly? Meet with our Loan Forgiveness Specialists to get 1:1 help to answer all your PPP Loan Forgiveness questions. Sign up to schedule an appointment.
Disclaimer: The information provided in this post does not, and is not intended to, constitute business, legal, tax, or accounting advice. All information, content, and materials available in this post are for general informational purposes only. Readers of this post should contact their attorney, business advisor, or tax advisor to obtain advice with respect to any particular matter. Filing out the Schedule A does not guarantee Loan Forgiveness from the SBA.