Calculating Maximum Loan Amounts – FINALLY Including Farmers!

Finally!  We’ve been asking for guidance on PPP loan amounts for Farmers, and 29 days later, we were provided with an FAQ that provides information on how to calculate maximum loan amounts, by business type, including Schedule F’s.  Treasury confirms that PPP applications submitted but not yet entered into E-tran will not have to be recalculated using the new guidance. PPP submissions re-opened on April 27, 2020.

• Self Employed Farmers should use IRS Form 1040 Schedule F in lieu of Schedule C, and Schedule F line 34 net farm profit should be used to determine loan amount in place of Schedule C line 31 net profit. The calculation is otherwise the same as for Schedule C filers, and is capped at $100,000. The 2019 IRS Form 1040 Schedule 1 and Schedule F must be included with the loan application.
  • 4797 gains from like kind exchanges not mentioned as being able to be netted to produce combined taxable income from the farm.
• Individual partners may not apply for separate PPP loans, and should include their self-employment income with the gross payroll of employees from the partnership in determining the maximum PPP loan amount. The Partner calculation for eligible net earnings from self-employment includes:
  • 2019 Schedule K-1 (IRS Form 1065) Net earnings from self-employment of individual U.S. based general partners that are subject to self-employment tax, computed from box 14a (reduced by any section 179 expense deduction claimed, unreimbursed partnership expenses claimed, and depletion claimed on oil and gas properties) multiplied by 0.9235, 2 up to $100,000 per partner.
• LLC:
  • Follow the PPP loan calculation guidance according to your tax classification, for example: Sch C for disregarded entity, partnership, or S or C Corporation.
• S-corp, C-corp, eligible Non-profits:
  • Income to S shareholders continues to be ineligible.

PPP Maximum Loan Calculations

After analyzing your maximum PPP Loan amount, what additional documentation can be substantiate the applied-for PPP loan amount?

• 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. Similarly, records from a retirement administrator can be used to document employer retirement contributions while records from a health insurance company or third-party administrator for a self-insured plan can document employer health insurance contributions.

If you have additional questions relating to you loan amount calculation, contact our experts today.

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For funding alternatives outside of PPP, go to our alternative funding page here.