Payroll

How you calculate your maximum loan amount depends upon whether or not you employ other individuals. 

 

If you have no employees, the following methodology should be used to calculate your maximum loan amount:

1. Find your 2019 or 2020 IRS Form 1040 Schedule C line 31 net profit amount (if you are using 2020 to calculate payroll costs and have not yet filed a 2020 return, fill it out and compute the value). If this amount is over $100,000, reduce it to $100,000. If this amount is zero or less, you are not eligible for a PPP loan.
2. Calculate the average monthly net profit amount (divide the amount from Step 1 by 12).
3. Multiply the average monthly net profit amount from Step 2 by 2.5. 
4. Add the outstanding amount of any Economic Injury Disaster Loan (EIDL) made between January 31, 2020 and April 3, 2020 that you seek to refinance. Do not include the amount of any advance under an EIDL COVID-19 loan (because it does not have to be repaid).

If you have employees, the following methodology should be used to calculate your maximum loan amount:

1. Compute 2019 or 2020 payroll (using the same year for all items) by adding the following: 
   • Your 2019 or 2020 Form 1040 Schedule C line 31 net profit amount (if you are using 2020 and have not yet filed a 2020 return, fill it out and compute the value), up to $100,000 on an annualized basis, as prorated for the period during which the payments are made or the obligation to make the payments is incurred, if this amount is over $100,000, reduce it to $100,000, if this amount is less than zero, set this amount at zero;
   • 2019 or 2020 gross wages and tips paid to your employees whose principal place of residence is in the United States computed using 2019 or 2020 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; subtract any amounts paid to any individual employee in excess of $100,000 on an annualized basis, as prorated for the period during which the payments are made or the obligation to make the payments is incurred and any amounts paid to any employee whose principal place of residence is outside the United States;
   • 2019 or 2020 employer contributions to employee group health, life, disability, vision and dental insurance (portion of IRS Form 1040 Schedule C line 14 attributable to those contributions); retirement contributions (Form 1040 Schedule C line 19), and state and local taxes assessed on employee compensation (primarily under state laws commonly referred to as the State Unemployment Tax Act or SUTA from state quarterly wage reporting forms).
2. Calculate the average monthly amount (divide the amount from Step 1 by 12).
3. Multiply the average monthly amount from Step 2 by 2.5.
4. Add the outstanding amount of any EIDL made between January 31, 2020 and April 3, 2020 that you seek to refinance. Do not include the amount of any advance under an EIDL COVID-19 loan (because it does not have to be repaid)

How you calculate your maximum loan amount depends upon whether or not you employ other individuals

 

If you have no employees, the following methodology should be used to calculate your maximum loan amount:

1. Find your 2019 or 2020 IRS Form 1040 Schedule C line 7 gross income amount (if you are using 2020 to calculate payroll costs and have not yet filed a 2020 return, fill it out and compute the value). If this amount is zero or less, you are not eligible for a PPP loan.
2. Calculate the average monthly gross income amount (divide the amount from Step 1 by 12). If this amount is more than $8,333.33, reduce it to $8,333.33.
3. Multiply the average monthly net profit amount from Step 2 by 2.5.
4. Add the outstanding amount of any Economic Injury Disaster Loan (EIDL) made between January 31, 2020 and April 3, 2020 that you seek to refinance. Do not include the amount of any advance under an EIDL COVID-19 loan (because it does not have to be repaid).

If you have employees, the following methodology should be used to calculate your maximum loan amount:

1. Find your 2019 or 2020 IRS Form 1040 Schedule C line 7 gross income amount (if you are using 2020 to calculate payroll costs and have not yet filed a 2020 return, fill it out and compute the value). Subtract 2019 or 2020 employee payroll costs summed from Form 1040 Schedule C lines 14, 19, and 26. If you have employee payroll costs on line 28, you must subtract them from gross income. If this amount is zero or less, you are not eligible for a PPP loan.
2. Divide the gross income amount from Step 1 by 12. If this amount is more than $8,333.33, reduce it to $8,333.33.
3. For 2019 or 2020 (using the same year for all items), calculate the sum of:
   • Gross wages and tips paid to your employees whose principal place of residence is in the United States, up to $100,000 per employee, which can be computed using:
     • 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, and
     • Minus (i) any amount paid to any individual employee in excess of $100,000, and (ii) any amounts paid to any employee whose principal place of residence is outside the United States;
   • Employer contributions for employee group health, life, disability, vision, and dental insurance (the portion of IRS Form 1040 Schedule C line 14 attributable to those contributions);
   • Employer contributions to employee retirement plans (IRS Form 1040 Schedule C line 19); and
   • Employer state and local taxes assessed on employee compensation, primarily state unemployment insurance tax (from state quarterly wage reporting forms).
4. Calculate average monthly payroll costs for employees (divide the amount from Step 3 by 12).
5. Sum the amounts from Step 2 and Step 4 and multiply by 2.5.
6. Add the outstanding amount of any EIDL made between January 31, 2020 and April 3, 2020 that you seek to refinance. Do not include the amount of any advance under an EIDL COVID-19 loan (because it does not have to be repaid).

How you calculate your maximum loan amount depends upon whether you employ other individuals. 

 

If you have no employees, the following methodology should be used to calculate your maximum loan amount:

1. Find your 2019 or 2020 IRS Form 1040 Schedule F line 9 gross income (if you are using 2020 and you have not yet filed a 2020 return, fill it out and compute the value). If this amount is over $100,000, reduce it to $100,000. If this amount is zero or less, you are not eligible for a PPP loan.
2. Divide the amount from Step 1 by 12.
3. Multiply the average monthly gross income amount from Step 2 by 2.5.
4. Add the outstanding amount of any Economic Injury Disaster Loan (EIDL) made between January 31, 2020 and ending on April 3, 2020 that you seek to refinance. Do not include the amount of any advance under an EIDL COVID-19 loan (because it does not have to be repaid).

If you have employees, the following methodology should be used to calculate your maximum loan amount:

1. Compute 2019 or 2020 payroll (using the same year for all items) by adding the following:
   • The difference between your 2019 or 2020 Form 1040 Schedule F line 9 gross income amount (if you are using 2020 and you have not yet filed a 2020 return, fill it out and compute the value), and the sum of Schedule F lines 15, 22, 23, and 37, up to $100,000 on an annualized basis, as prorated for the period during which the payments are made or the obligation to make the payments is incurred, if this amount is over $100,000, reduce it to $100,000, if this amount is less than zero, set this amount at zero
   • 2019 or 2020 gross wages and tips paid to your employees whose principal place of residence is in the United States computed using 2019 or 2020 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; subtract any amounts paid to any individual employee in excess of $100,000 on an annualized basis, as prorated for the period during which the payments are made or the obligation to make the payments is incurred and any amounts paid to any employee whose principal place of residence is outside the United States; and
   • 2019 or 2020 employer contributions for employee group health, life, disability, vision and dental insurance (portion of IRS Form 1040 Schedule F line 15 attributable to those contributions), employer contributions for employee retirement contributions (Form 1040 Schedule F line 15), and state and local taxes assessed on employers for employee compensation (primarily under state laws commonly referred to as the State Unemployment Tax Act or SUTA from state quarterly wage reporting forms).
2. Calculate the average monthly amount (divide the amount from Step 1 by 12).
3. Multiply the average monthly amount from Step 2 by 2.5. 
4. Add the outstanding amount of any EIDL made between January 31, 2020 and April 3, 2020 that you seek to refinance. Do not include the amount of any advance under an EIDL COVID-19 loan (because it does not have to be repaid).

The following methodology should be used to calculate the maximum amount that partnerships can borrow:

1. Compute 2019 or 2020 payroll (using the same year for all items) by adding
   • Net earnings from self-employment of individual general partners in 2019 or 2020, as reported on IRS Form 1065 K-1, reduced by section 179 expense deduction claimed, unreimbursed partnership expenses claimed, and depletion claimed on oil and gas properties, multiplied by 0.9235, that is not more than $100,000 per partner;
   • 2019 or 2020 gross wages and tips paid to your employees whose principal place of residence is in the United States, if any, which can be computed using 2019 or 2020 IRS Form 941 Taxable Medicare wages and 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 and 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 contributions for employee group health, life, disability, vision and dental insurance, if any (portion of IRS Form 1065 line 19 attributable to those contributions);
   • 2019 or 2020 employer contributions to employee retirement plans, if any (IRS Form 1065 line 18); and 
   • 2019 or 2020 employer state and local taxes assessed on employee compensation, primarily state unemployment insurance tax (from state quarterly wage reporting forms), if any.
2. Calculate the average monthly payroll costs (divide the amount from Step1 by 12).
3. Multiply the average monthly payroll costs from Step 2 by 2.5. 
4. Add any outstanding amount of any EIDL made between January 31, 2020 and April 3, 2020 that you seek to refinance. Do not include the amount of any advance under an EIDL COVID-19 loan (because it does not have to be repaid).

The following methodology should be used to calculate the maximum amount that can be borrowed for corporations, including S and C corporations:

1. Compute 2019 or 2020 payroll (using the same year for all items) by adding
   
   • 2019 or 2020 (whichever you used to calculate loan amount) gross wages and tips paid to your employees whose principal place of residence is in the United States, which can be computed using 2019 or 2020 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 (whichever you used to calculate loan amount) 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 (whichever you used to calculate loan amount) employer retirement contributions (IRS Form 1120 line 23 or IRS Form 1120-S line 17); and
   • 2019 or 2020 (whichever you used to calculate loan amount) employer state and local taxes assessed on employee compensation, primarily state unemployment insurance tax (from state quarterly wage reporting forms). 
2. Calculate the average monthly payroll costs (divide the amount from Step 1 by 12).
3. Multiply the average monthly payroll costs from Step 2 by 2.5.
4. Add any outstanding amount of any EIDL made between January 31, 2020 and April 3, 2020 that you seek to refinance. Do not include the amount of any advance under an EIDL COVID-19 loan (because it does not have to be repaid).

NOTE: IRS Form W-2s and IRS Form W-3 or payroll processor reports, including quarterly and annual tax reports, can be used in place of IRS Form 941. Additionally, very small businesses that file an annual IRS Form 944 instead of quarterly IRS Form 941 should rely on and provide IRS Form 944.

The following methodology should be used to calculate the maximum amount that can be borrowed for eligible nonprofit organizations:

1. Compute 2019 or 2020 payroll (using the same year for all items) by adding
   • a. 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 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 990 Part IX line 9 attributable to health insurance);
   • 2019 or 2020 employer retirement contributions (IRS Form 990 Part IX line 8); and
   • 2019 or 2020 employer state and local taxes assessed on employee compensation, primarily state unemployment insurance tax (from state quarterly wage reporting forms).
2. Calculate the average monthly payroll costs (divide the amount from Step 1 by 12).
3. Multiply the average monthly payroll costs from Step 2 by 2.5. 
4. Add the outstanding amount of an Economic Injury Disaster Loan (EIDL) made between January 31, 2020 and April 3, 2020 that you seek to refinance. Do not include the amount of any “advance” under an EIDL COVID-19 loan (because it does not have to be repaid).

NOTE: IRS Form W-2s and IRS Form W-3 or payroll processor reports, including quarterly and annual tax reports, can be used in place of IRS Form 941. Additionally, very small businesses that file an annual IRS Form 944 instead of quarterly IRS Form 941 should rely on and provide IRS Form 944.

The following methodology will be most useful for many applicants. 

1. Aggregate payroll costs (See ‘Payroll Costs’) from 2019 or 2020 for employees whose principal place of residence is the United States.
2. Subtract any compensation paid to an employee in excess of $100,000 on an annualized basis, as prorated for the period during which the payments are made or the obligation to make the payments is incurred
3. Calculate average monthly payroll costs (divide the amount from Step 2 by 12).
4. Multiply the average monthly payroll costs from Step 3 by 2.5. 
5. Add the outstanding amount of an Economic Injury Disaster Loan (EIDL) made between January 31, 2020 and April 3, 2020 that you seek to refinance. Do not include the amount of any “advance” under an EIDL COVID-19 loan (because it does not have to be repaid).

Payroll Costs

 

Payroll costs consist of compensation to employees (whose principal place of residence is the United States) in the form of salary, wages, commissions, or similar compensation; cash tips or the equivalent (based on employer records of past tips or, in the absence of such records, a reasonable, good-faith employer estimate of such tips); payment for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payment for the provision of employee benefits consisting of group health care or group life, disability, vision, or dental insurance, including insurance premiums, and retirement; payment of state and local taxes assessed on compensation of employees; and for an independent contractor or sole proprietor, wages, commissions, income, or net earnings from self-employment, or similar compensation.

 

Is there anything that is expressly excluded from the definition of payroll costs?

 

Yes. The Act expressly excludes the following:

• Any compensation of an employee whose principal place of residence is outside of the United States;
• The compensation of an individual employee in excess of $100,000 on an annualized basis, as prorated for the period during which the payments are made or the obligation to make the payments is incurred;
• 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; and
• 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).

How you calculate your maximum loan amount depends upon whether or not you employ other individuals.

 

If you have no employees, the following methodology should be used to calculate your maximum loan amount:

1. Find your 2019 or 2020 IRS Form 1040 Schedule C line 31 net profit amount (if you are using 2020 to calculate payroll costs and have not yet filed a 2020 return, fill it out and compute the value). If this amount is over $100,000, reduce it to $100,000. If this amount is zero or less, you are not eligible for a PPP loan.
2. Calculate the average monthly net profit amount (divide the amount from Step 1 by 12).
3. Multiply the average monthly net profit amount from Step 2 by 2.5.
   NOTE: Multiply by 3.5 only if you are in the Accommodation and Food Services sector and reported a NAICS code beginning with 72 as your business activity code on your most recent IRS income tax return

If you have employees, the following methodology should be used to calculate your maximum loan amount:

1. Compute 2019 or 2020 payroll (using the same year for all items) by adding the following:
   • Your 2019 or 2020 Form 1040 Schedule C line 31 net profit amount (if you are using 2020 and have not yet filed a 2020 return, fill it out and compute the value), up to $100,000 on an annualized basis, as prorated for the period during which the payments are made or the obligation to make the payments is incurred, if this amount is over $100,000, reduce it to $100,000, if this amount is less than zero, set this amount at zero;
   • 2019 or 2020 gross wages and tips paid to your employees whose principal place of residence is in the United States computed using 2019 or 2020 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; subtract any amounts paid to any individual employee in excess of $100,000 on an annualized basis, as prorated for the period during which the payments are made or the obligation to make the payments is incurred and any amounts paid to any employee whose principal place of residence is outside the United States;
   • 2019 or 2020 employer contributions to employee group health, life, disability, vision and dental insurance (portion of IRS Form 1040 Schedule C line 14 attributable to those contributions); retirement contributions (Form 1040 Schedule C line 19), and state and local taxes assessed on employee compensation (primarily under state laws commonly referred to as the State Unemployment Tax Act or SUTA from state quarterly wage reporting forms).
2. Calculate the average monthly amount (divide the amount from Step 1 by 12).
3. Multiply the average monthly amount from Step 2 by 2.5.
   NOTE: Multiply by 3.5 only if you are in the Accommodation and Food Services sector and reported a NAICS code beginning with 72 as your business activity code on your most recent IRS income tax return.

How you calculate your maximum loan amount depends upon whether or not you employ other individuals

 

If you have no employees, the following methodology should be used to calculate your maximum loan amount:

1. Find your 2019 or 2020 IRS Form 1040 Schedule C line 7 gross income amount (if you are using 2020 to calculate payroll costs and have not yet filed a 2020 return, fill it out and compute the value). If this amount is zero or less, you are not eligible for a PPP loan.
2. Calculate the average monthly gross income amount (divide the amount from Step 1 by 12). If this amount is more than $8,333.33, reduce it to $8,333.33.
3. Multiply the average monthly net profit amount from Step 2 by 2.5 (or by 3.5 if NAICS Code 72).

If you have employees, the following methodology should be used to calculate your maximum loan amount:

1. Find your 2019 or 2020 IRS Form 1040 Schedule C line 7 gross income amount (if you are using 2020 to calculate payroll costs and have not yet filed a 2020 return, fill it out and compute the value). Subtract 2019 or 2020 employee payroll costs summed from Form 1040 Schedule C lines 14, 19, and 26. If you have employee payroll costs on line 28, you must subtract them from gross income. If this amount is zero or less, you are not eligible for a PPP loan.
2. Divide the gross income amount from Step 1 by 12. If this amount is more than $8,333.33, reduce it to $8,333.33.
3. For 2019 or 2020 (using the same year for all items), calculate the sum of:
   • Gross wages and tips paid to your employees whose principal place of residence is in the United States, up to $100,000 per employee, which can be computed using:
     • 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, and
     • Minus (i) any amount paid to any individual employee in excess of $100,000, and (ii) any amounts paid to any employee whose principal place of residence is outside the United States;
   • Employer contributions for employee group health, life, disability, vision, and dental insurance (the portion of IRS Form 1040 Schedule C line 14 attributable to those contributions);
   • Employer contributions to employee retirement plans (IRS Form 1040 Schedule C line 19); and
     
   • Employer state and local taxes assessed on employee compensation, primarily state unemployment insurance tax (from state quarterly wage reporting forms).
4. Calculate average monthly payroll costs for employees (divide the amount from Step 3 by 12).
5. Sum the amounts from Step 2 and Step 4 and multiply by 2.5 (or by 3.5 if NAICS Code 72).

How you calculate your maximum loan amount depends upon whether you employ other individuals.

 

If you have no employees, the following methodology should be used to calculate your maximum loan amount:

1. Find your 2019 or 2020 IRS Form 1040 Schedule F line 9 gross income (if you are using 2020 and you have not yet filed a 2020 return, fill it out and compute the value). If this amount is over $100,000, reduce it to $100,000. If this amount is zero or less, you are not eligible for a PPP loan.
2. Divide the amount from Step 1 by 12.
3. Multiply the average monthly gross income amount from Step 2 by 2.5.
   NOTE: Multiply by 3.5 only if you are in the Accommodation and Food Services sector and reported a NAICS code beginning with 72 as your business activity code on your most recent IRS income tax return

If you have employees, the following methodology should be used to calculate your maximum loan amount:

1. Compute 2019 or 2020 payroll (using the same year for all items) by adding the following:
   • The difference between your 2019 or 2020 Form 1040 Schedule F line 9 gross income amount (if you are using 2020 and you have not yet filed a 2020 return, fill it out and compute the value), and the sum of Schedule F lines 15, 22, 23, and 37, up to $100,000 on an annualized basis, as prorated for the period during which the payments are made or the obligation to make the payments is incurred, if this amount is over $100,000, reduce it to $100,000, if this amount is less than zero, set this amount at zero.
   • 2019 or 2020 gross wages and tips paid to your employees whose principal place of residence is in the United States computed using 2019 or 2020 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; subtract any amounts paid to any individual employee in excess of $100,000 on an annualized basis, as prorated for the period during which the payments are made or the obligation to make the payments is incurred and any amounts paid to any employee whose principal place of residence is outside the United States; and
   • 2019 or 2020 employer contributions for employee group health, life, disability, vision and dental insurance (portion of IRS Form 1040 Schedule F line 15 attributable to those contributions), employer contributions for employee retirement contributions (Form 1040 Schedule F line 15), and state and local taxes assessed on employers for employee compensation (primarily under state laws commonly referred to as the State Unemployment Tax Act or SUTA from state quarterly wage reporting forms).
2. Calculate the average monthly amount (divide the amount from Step 1 by 12).
3. Multiply the average monthly amount from Step 2 by 2.5.
   NOTE: Multiply by 3.5 only if you are in the Accommodation and Food Services sector and reported a NAICS code beginning with 72 as your business activity code on your most recent IRS income tax return.

The following methodology should be used to calculate the maximum amount that partnerships can borrow:

1. Compute 2019 or 2020 payroll (using the same year for all items) by adding
   • Net earnings from self-employment of individual general partners in 2019 or 2020, as reported on IRS Form 1065 K-1, reduced by section 179 expense deduction claimed, unreimbursed partnership expenses claimed, and depletion claimed on oil and gas properties, multiplied by 0.9235, that is not more than $100,000 per partner;
   • 2019 or 2020 gross wages and tips paid to your employees whose principal place of residence is in the United States, if any, which can be computed using 2019 or 2020 IRS Form 941 Taxable Medicare wages and 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 and 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 contributions for employee group health, life, disability, vision and dental insurance, if any (portion of IRS Form 1065 line 19 attributable to those contributions);
   • 2019 or 2020 employer contributions to employee retirement plans, if any (IRS Form 1065 line 18); and
   • 2019 or 2020 employer state and local taxes assessed on employee compensation, primarily state unemployment insurance tax (from state quarterly wage reporting forms), if any.
2. Calculate the average monthly payroll costs (divide the amount from Step1 by 12).
3. Multiply the average monthly payroll costs from Step 2 by 2.5.
   NOTE: Multiply by 3.5 only if you are in the Accommodation and Food Services sector and reported a NAICS code beginning with 72 as your business activity code on your most recent IRS income tax return

The following methodology should be used to calculate the maximum amount that can be borrowed for corporations, including S and C corporations:

1. Compute 2019 or 2020 payroll (using the same year for all items) by adding
   • 2019 or 2020 (whichever you used to calculate loan amount) gross wages and tips paid to your employees whose principal place of residence is in the United States, which can be computed using 2019 or 2020 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 (whichever you used to calculate loan amount) 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 (whichever you used to calculate loan amount) employer retirement contributions (IRS Form 1120 line 23 or IRS Form 1120-S line 17); and
   • 2019 or 2020 (whichever you used to calculate loan amount) employer state and local taxes assessed on employee compensation, primarily state unemployment insurance tax (from state quarterly wage reporting forms).
2. Calculate the average monthly payroll costs (divide the amount from Step 1 by 12).
3. Multiply the average monthly payroll costs from Step 2 by 2.5.
   NOTE: Multiply by 3.5 only if you are in the Accommodation and Food Services sector and reported a NAICS code beginning with 72 as your business activity code on your most recent IRS income tax return.

NOTE: IRS Form W-2s and IRS Form W-3 or payroll processor reports, including quarterly and annual tax reports, can be used in place of IRS Form 941. Additionally, very small businesses that file an annual IRS Form 944 instead of quarterly IRS Form 941 should rely on and provide IRS Form 944.

The following methodology should be used to calculate the maximum amount that can be borrowed for eligible nonprofit organizations:

1. Compute 2019 or 2020 payroll (using the same year for all items) by adding
   • 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 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 990 Part IX line 9 attributable to health insurance);
   • 2019 or 2020 employer retirement contributions (IRS Form 990 Part IX line 8); and
   • 2019 or 2020 employer state and local taxes assessed on employee compensation, primarily state unemployment insurance tax (from state quarterly wage reporting forms).
2. Calculate the average monthly payroll costs (divide the amount from Step 1 by 12).
3. Multiply the average monthly payroll costs from Step 2 by 2.5.
   Note: Multiply by 3.5 only if you are in the Accommodation and Food Services sector and reported a NAICS code beginning with 72 as your business activity code on your most recent IRS income tax return.

NOTE: IRS Form W-2s and IRS Form W-3 or payroll processor reports, including quarterly and annual tax reports, can be used in place of IRS Form 941. Additionally, very small businesses that file an annual IRS Form 944 instead of quarterly IRS Form 941 should rely on and provide IRS Form 944.

The following methodology will be most useful for many applicants.

1. Aggregate payroll costs (See ‘Payroll Costs’) from 2019 or 2020 for employees whose principal place of residence is the United States.
   
2. Subtract any compensation paid to an employee in excess of $100,000 on an annualized basis, as prorated for the period during which the payments are made or the obligation to make the payments is incurred
3. Calculate average monthly payroll costs (divide the amount from Step 2 by 12).
4. Multiply the average monthly payroll costs from Step 3 by 2.5.
   NOTE: Multiply by 3.5 only if you are in the Accommodation and Food Services sector and reported a NAICS code beginning with 72 as your business activity code on your most recent IRS income tax return.

Payroll Costs

 

Payroll costs consist of compensation to employees (whose principal place of residence is the United States) in the form of salary, wages, commissions, or similar compensation; cash tips or the equivalent (based on employer records of past tips or, in the absence of such records, a reasonable, good-faith employer estimate of such tips); payment for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payment for the provision of employee benefits consisting of group health care or group life, disability, vision, or dental insurance, including insurance premiums, and retirement; payment of state and local taxes assessed on compensation of employees; and for an independent contractor or sole proprietor, wages, commissions, income, or net earnings from self-employment, or similar compensation.

 

Is there anything that is expressly excluded from the definition of payroll costs?

 

Yes. The Act expressly excludes the following:

• Any compensation of an employee whose principal place of residence is outside of the United States;
• The compensation of an individual employee in excess of $100,000 on an annualized basis, as prorated for the period during which the payments are made or the obligation to make the payments is incurred;
• 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; and
• 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).