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Small business owners lucky enough to get an emergency loan under the Paycheck Protection Program have an uphill battle: navigating forgiveness.

The US Small Business Administration has granted 2.2 million small business loans in the week since the emergency loan program reopened.

Congress has replenished the prize pool to the tune of $ 310 billion, and so far more than $ 175 billion in funding has already been announced, according to a May 3 announcement of the SBA.

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Much of what has made financing so popular is the fact that the loans – which are meant to cover eight weeks of salary expenses, along with rent, most mortgage interest, and utility costs – are forgivable.

The eight-week clock starts ticking when the employer receives the funding, meaning companies could pay workers to stay home if companies are still subject to coronavirus blockages.

You should use at least 75% of the amount you borrowed for salary expenses. Any portion that is not remitted must be repaid within two years – after a six-month grace period – at an interest rate of 1%.

This is where the accountants who work with these entrepreneurs run into problems.

The Treasury Department and the SBA are releasing critical information in a trickle through a growing list of “frequently asked questions,” but they have yet to provide formal guidelines on forgiveness.

“From a practical standpoint, it’s impossible to give advice,” said Tony Nitti, CPA and partner at RubinBrown in Denver. “We are operating completely in the dark and some of these companies are already almost halfway through their eight weeks.”

Lack of clarity

The latest batch of FAQs, out on sunday evening, clarified that an employer’s PPP pardon will not be reduced if they offer to rehire a dismissed employee and the individual rejects work.

This only answers one of the many burning questions CPAs have asked themselves about companies’ eligibility for pardon.

Another issue that is still unclear, according to the American Institute of CPAs, is defining “full-time equivalent” employees and calculating the amount eligible for the rebate.

Companies applied for the PPP based on the number of employees they had on board, whether full-time or part-time.

The CARES Act, which established the PPP, uses the “full-time equivalent employee” standard to determine whether the amount remitted will be reduced in light of reductions in staff or hours.

“It’s the full-time equivalents that will be a challenge,” said Erik Asgeirsson, president and CEO of, the business and technology arm of AICPA. “Say you can’t get the employee back, so do you have to hire someone else?”

“We are talking about conformity and forgiveness, but that will blur with other elements that will have to accompany forgiveness,” he said.

The AICPA also recommended that the Treasury and the SBA adjust the start date of the eight-week clock to start when a state lifts its shelter orders in place – not when the loan is disbursed.

Practical advice

Without formal guidance, CPAs find it difficult to advise clients on what to expect in the forgiveness phase of their loans.

“Think about the restaurant that is only partially open and brings in half of its employees,” said Eric Hjerpe, CPA at Hjerpe & Tennison in Bloomington, Illinois. “So, is only 50% forgiven? Because if it is, you have a loan and you have no money.”

So far, the recommendation of CPAs has been that clients act within the spirit of the law as best they can, with the understanding that nothing – not even the expected forgiveness – is guaranteed.

“The only thing we feel comfortable with is saying that if you get $ 100,000 multiply it by 75% and if you spend that amount on salary costs over the next eight weeks you’ll be fine.” , Nitti said.

“But even that is incorrect,” he said. “You could spend that amount on payroll, but your rebate amount could be reduced if you lose people or cut wages – and we don’t have any advice yet on how these components work.”