Introduction:
The Paycheck Protection Program (PPP) was a vital lifeline for many small businesses during the COVID-19 pandemic. However, as the program comes to an end, many businesses are now facing the daunting task of loan forgiveness audits. This article provides a comprehensive 24-month forgiveness documentation checklist to help businesses survive the audit process and ensure loan forgiveness.
1. Loan Application and Approval Documentation:
– Original PPP loan application
– Approval notice from the lender
– Any supporting documents submitted with the application (e.g., payroll reports, income verification)
2. Forgiveness Calculation Documentation:
– Payroll documentation for the covered period (24, 8, or 12 weeks)
a. Payroll register or W-2 forms
b. 1099-MISC forms for independent contractors and gig workers
c. Proof of salary, wages, commissions, and tips
– Documentation of non-payroll expenses (e.g., rent, utilities, mortgage interest)
a. Rent receipts or lease agreements
b. Utility bills
c. Mortgage statements or loan amortization schedules
3. Employee Verification Documentation:
– Verification of full-time equivalent (FTE) employees during the covered period
a. Payroll records
b. Headcount reports
– Documentation of any changes in employee count or compensation
a. Payroll records
b. Employee offer letters or change in employment agreements
4. Economic Impact Statement Documentation:
– Statement explaining the necessity of the loan and the impact of the COVID-19 pandemic on the business
– Any relevant news articles, government guidance, or industry reports supporting the statement
5. Non-Forgiveness Documentation (if applicable):
– Documentation of any amounts that are not eligible for forgiveness (e.g., salaries above the $100,000 cap)
a. Payroll records
b. Documentation of excess salaries or wages
– Documentation of any funds used for unauthorized purposes (e.g., personal expenses, shareholder distributions)
a. Bank statements
b. Receipts or proof of expenditures
6. PPP Loan Forgiveness Application and Documentation:
– Completed PPP loan forgiveness application (EIDL Loan Forgiveness Application or PPP Forgiveness Application)
– Documentation supporting the forgiveness amount (e.g., payroll records, rent receipts)
– Any additional documentation requested by the lender or the Small Business Administration (SBA)
Conclusion:
Surviving a PPP loan forgiveness audit requires thorough documentation and attention to detail. By following this 24-month forgiveness documentation checklist, businesses can increase their chances of successfully navigating the audit process and securing loan forgiveness. It is crucial to keep all relevant records organized and readily accessible to ensure a smooth and hassle-free audit experience.
