In this 3-minute read:
- Calculate max Paycheck Protection Program loan for S or C corp
IMPORTANT UPDATE FOR 2021: Congress has approved an extension of the PPP loan program. Applications may be submitted to SBA until May 31, 2021, including “second draw” PPP loans for businesses that received PPP funding in 2020.
As businesses across the U.S. are applying for the PPP loans, it’s important that they request the right amount of money to help keep their business going through this crisis while keeping it at a level that will get approved (and which is true and accurate).
Even if your business is set up as an S or C corporation, you may qualify for the PPP loan. Check here for more eligible business types.
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Steps to calculate the maximum PPP loan allowed for S or C corporations
Under the Paycheck Protection Program, businesses can request loans up to $10 million to cover their payroll expenses for 8 weeks. As long as they maintain specific requirements, each business has the opportunity to get their loans forgiven too.
Follow the steps below to calculate your maximum PPP loan allowance for S and C corporations, up to the max of $10 million.
Step 1: Add up your 2019 or 2020 payroll costs
Here are the documents that you will need in order to calculate your 2019 or 2020 payroll costs. Gather the following and add up the totals as directed below:
Compute your 2019 or 2020 payroll costs by adding the following:
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- 2019 or 2020 gross wages and tips paid to your employees whose principal place of residence is in the United States, which can be computed using 2019 IRS Form 941 Taxable Medicare wages & tips (line 5c-column 1) from each quarter plus any pre-tax employee contributions for health insurance or other fringe benefits excluded from Taxable Medicare wages & tips, subtracting any amounts paid to any individual employee in excess of $100,000 and any amounts paid to any employee whose principal place of residence is outside the U.S;
- 2019 or 2020 employer health insurance contributions (portion of IRS Form 1120 line 24 or IRS Form 1120-S line 18 attributable to health insurance);
- 2019 or 2020 employer retirement contributions (IRS Form 1120 line 23 or IRS Form 1120-S line 17); and
- 2019 or 2020 employer state and local taxes assessed on employee compensation, primarily state unemployment insurance tax (from state quarterly wage reporting forms).
Please note: The corporation’s 2019 IRS Form 941 and state quarterly wage unemployment insurance tax reporting form from each quarter (or equivalent payroll processor records or IRS Wage and Tax Statements), along with the filed business tax return (IRS Form 1120 or IRS 1120-S) or other documentation of any retirement and health insurance contributions, must be provided to substantiate the applied-for PPP loan amount. A payroll statement or similar documentation from the pay period that covered February 15, 2020 must be provided to establish you were in operation and had employees on that date.
Step 2: Determine your average monthly payroll costs
Take your total from Step 1 and divide it by 12 to gather your average monthly payroll costs.
Step 3: Multiply your monthly average by 2.5
When you have your monthly average, multiply that number by 2.5. Each business is allowed 2.5 times their monthly payroll costs to get through the 8-24 weeks from the time they receive their loan.
Step 4: Include outstanding EIDL loans
Businesses that applied for an Economic Injury Disaster Loan (EIDL) through the SBA can include any outstanding amount of EIDL loans their request amount for the PPP loan.
Do not include any “advance” for an EIDL COVID-19 loan that you have received, as those funds do not have to be repaid.
The following is an example of how this might be calculated for your C or S corp if you have taken out an EIDL loan:
Annual payroll expenses: $144,000
Average monthly payroll expenses: $12,000
Multiply by 2.5: $30,000
Add outstanding EIDL loan amount of $10,000
Total amount to request: $40,000
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