The revised rule allowing practice owners to include up to $20,833 of their compensation towards the PPP loan forgiveness calculation extends to S-Corp owners too. Previously, owner comp was capped at $15,385, which is a max salary of $100k divided by 52 weeks multiplied by 8 for the Covered Period.
Your salary only qualifies for this higher limit if you will base your PPP Loan forgiveness calculation on the 24-week Covered Period per the revised instructions:
Owner Compensation: Enter any amounts paid to owners (owner-employees, a self-employed individual, or general partners). For a 24-week Covered Period, this amount is capped at $20,833 (the 2.5-month equivalent of $100,000 per year) for each individual or the 2.5-month equivalent of their applicable compensation in 2019, whichever is lower. For an 8-week Covered Period, this amount is capped at 8/52 of 2019 compensation (up to $15,385).
But this is for earned income, right? This would not include K-1 passive income. What are your thoughts on this?
Hi Rick,
Yes, it’s based on earned income only. Partners who get K1s would base on the self-employment income as reflected on the K1. Sole proprietors would base the calculation on their 2019 Schedule C net income.
In the beginning I believe I read the health insurance cost for a Sub S owner/employee was not part of the capped amount. Now I am reading it is included in the capped amount. Is that correct?
Also, I had an employee who worked part time starting in late January of 2020. I let him go when we had to shut down. I had no plans to hire him back. Do I still have to count him in my FTE’s for the covered period? During the covered period I had 2 FTE’s. Including the part time employee, I had 2.4 FTE’s during the 1st Qtr of 2020. He was a .4 FTE. I thought maybe I could use the Feb.15th-June 30th 2019 alternate reference period. I had 3 FTE’s then but one of them was forced to quit in August of 2019. With him quitting would I have to count him as an FTE if I used that reference period? He isn’t even available to work. He is actually in jail. Thank you for any help you could possibly give me. I am so confused.