2020 Year-End Tax Guide

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THE MARCUM 2020 YEAR-END TAX GUIDE

Restaurant Recovery: An Update on PPP Loan Forgiveness During COVID-19

CALCULATIONS Full-Time Equivalent Employees (FTE):

Wages: X Any employee who was paid $1,923.08 for any week during 2019 (annualizes to $100,000) can be removed from the wage reduction calculation. Likewise, an employee earning a $50,000 annual salary who was paid a bonus of $2,000 at any time during 2019 can be excluded from the wage reduction comparison, assuming you pay the person weekly. This can greatly reduce the number of people to include in your calculation. X The 25% reduction refers to wages per hour on an employee-by-employee basis. X The eligible compensation forgiveness amount includes only gross wages; no employer federal taxes are eligible. X To calculate weekly wages for a server, use their hourly rate. If wage rates changed or the employer was paying tip replacement compensation, then use the average of wages and tips during the period. X Do not include cash tips/compensation not paid by the employer in Schedule A. X PTO must actually have been paid during the covered period in order to be eligible for forgiveness. Do not include PTO in the calculation of any unpaid time off. X It is possible that bonus wages in the look-back period may count in determining the 25% wage reduction when comparing your 2020 post-PPP payroll. X A sole proprietor is able to take a draw and apply those wages to the PPP forgiveness calculation; however, a sole proprietor is limited to $20,833 or 2.5 times their 2019 Schedule C net income, whichever is lower. And sole proprietors should wait at least 11 weeks before applying for forgiveness in order to maximize the amount forgiven for payroll costs. X Those experiencing difficulty reaching the 60% mark for payroll forgiveness may be able to fill the gap by including employee bonuses; however, the $100,000 annual salary cap per employee applies. State or local taxes assessed on wages, such as state unemployment paid by the employer, are eligible.

X For loan forgiveness purposes, FTE is based on 40 hours per week, per the guidance issued by the Small Business Administration (SBA) and U.S. Treasury. X For the FTE reduction lookback period, you can select either January 1-February 29, 2020, or February 15-June 30, 2020. If you are a seasonal employer, you have a third option of any consecutive 12-week period between May 1 and September 15, 2019. X If your FTE total is reduced due to employees not returning to work or finding jobs elsewhere, you made a good faith written offer to rehire which was declined, and you were unable to find suitable replacements, you do not have to include these employees in your calculations and you will not be penalized. X If an employee works from 9:00-5:00 but takes an hour for lunch, the FTE calculation could be different depending on whether the employee is hourly or salaried. If the employee is salaried and the normal work week is 35 hours, assume (1) FTE for that employee. If the employee is hourly, use 35 hours. X If business is anticipated to slow and the FTE will drop during the remainder of your covered period, end the covered period and apply for forgiveness once the funds have been exhausted. There is nothing in the guidance that requires you to maintain your FTE levels after the covered period or December 31, 2020, whichever comes first. X The end of the loan period used for measuring whether labor has been returned to former levels is the last pay period.