How to Calculate Your PPP Loan Amount

• If you run a business with employees, you’ll need to determine your eligible payroll costs to calculate your PPP loan amount. Basic details are provided in the instructions for each method; here, we dig a little bit deeper into what you can and—importantly—cannot include. According to PPP rules and regulations, you may use either calendar year 2019 or 2020 information to calculate your payroll. 

Calculating payroll costs based on calendar year 2020 or 2019 rather than the trailing twelve months will simplify the calculations and documentation requirements for you because payroll records are more commonly created and retained on a calendar-year basis. Most third-party payroll processing companies offer features that allow you to easily pull payroll reports that can be used for your PPP application. Check with your provider to see what tools are available.

Here’s what you can include in payroll costs:

• Salaries, commissions, or similar compensation. You can obtain these figures from any of the following sources:
  • Annual payroll from payroll processor records (payroll reports can be from companies such as Paychex, ADP, Justworks, Gusto, and many others)
  • IRS Form 940 (Annual payroll is shown in Box #3 in this document)
  • IRS Form 941 (Provide 2019 or 2020 Q1-Q4 statements. Annual payroll is determined by adding Line 5c-Column 1 for each quarter (Q1-Q4) to determine the annual payroll cost)
  • State quarterly wage unemployment insurance tax reporting forms from each quarter in 2019 or 2020
  • For a seasonal business, a payroll report for any 12-week period selected by the seasonal employer beginning February 15, 2019 and ending February 15, 2020
  • Cash tips (based on employer records of past tips or, if you do not have these records, a reasonable, good faith estimate of such tips)
  • Payment for vacation, parental, family, medical, or sick leave and allowance for separation or dismissal (You can obtain this information from payroll processor records)
  • Payment of state and local taxes assessed on compensation of employees. You can obtain these figures from:
    • State unemployment tax and quarterly wage reporting forms
    • Payroll processor records
    • The net profit (line 31) from your Schedule C (for independent contractors or sole proprietors that report on Schedule C)
    • For Partnerships and LLCs which report on IRS Form 1065, you may include self-employment earnings (Box 14 A of each owner’s K-1 statement). The full 1065 will be requested to verify what is reported in Box 14 A
  • Employee benefits such as group health care or group life insurance, disability, vision, or dental insurance (including premiums), and retirement. You can obtain these figures from these sources:
    • Payroll processor records
    • Invoices
    • Account statements
    • If you are a Schedule C or Schedule F businesses, please reference your loan calculation method as the rules are method-specific

Here is what you specifically cannot include in payroll costs:

• Payments to 1099 employees (independent contractors can apply for a PPP loan on their own, so they do not count for purposes of a borrower’s PPP loan calculation)
• Guaranteed payments to partners
• Any compensation to an individual employee more than $100,000 (for example, if an individual earns $110,000, only $100,000 can be included in the loan calculation)
• Any compensation of an employee whose principal place of residence is outside of the United States
• Federal employment taxes imposed or withheld during the applicable period, including the employee’s and employer’s share of FICA (Federal Insurance Contributions Act) and Railroad Retirement Act taxes, and income taxes required to be withheld from employees. This is not common
• Qualified sick and family leave wages for which a credit is allowed under sections 7001 and 7003 of the Families First Coronavirus Response Act (Public Law 116–127)