AICPA Recommends PPP Applicants Use Gross Payroll Approach in Calculations

April 4, 2020

April 4, 2020 — Volume 27 No. 22

  From AICPA:

Video from AICPA - Update on PPP

Many of you have raised questions related to the salary calculation for the Paycheck Protection Program loan application. Yesterday, our AICPA-led coalition on small business funding, in conjunction with the National Payroll Reporting Consortium (NPRC), gathered to discuss the appropriate method for calculating Average Monthly Salary.

For the calculation of the average monthly payroll cost, applicants should use gross payroll (including tax expenses) — based on 2019 data — for the PPP loan application and forgiveness.

Our recommendation is based upon both the word and intent of the law. Neither the CARES Act itself nor the guidance the Small Business Administration (SBA) released Thursday evening specifically stated that payroll taxes should be excluded from the calculation. Additionally, based upon statements from members of Congress, it appears that the intent of the Act was to base the salary calculation on gross payroll with no adjustment for federal taxes. This ensures that payroll tax expenses are not passed on to the small businesses in need.

We know there are additional questions and concerns with the application process, and we are working diligently with our coalition partners to provide guidance as quickly as we can to expedite implementation. Here are three points that address some of the issues we are hearing from members.

  • As the SBA released guidance late Thursday evening, many banks are still working to get their loan application processing systems online. We are in discussions with the banking industry, which is working to get these systems online as quickly as possible.
  • Additionally, the Trump Administration has said that it will ask Congress for additional funding for small businesses if the initial $350 billion runs out.
  • Finally, we are developing information on how to determine other application calculations and are also working on a list of recommended documents that banks should accept for loan applications and forgiveness. Continue to watch your email and the AICPA Coronavirus Resource Center for these tools.

Our discussions with the Treasury Department, SBA, banks and payroll processors to address these and other issues are ongoing. We will keep you updated on our progress here and in our other efforts to protect Main Street America.

As always, thank you for your continued work with your clients to keep small businesses running and employees working.

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