Each week we will provide a detailed explanation of computations included on the SBA prepared PPP loan forgiveness application. In this blog, we will review the options for reporting payroll costs paid and payroll costs incurred during the 8-week period using either the covered period or alternative payroll covered period.
The covered period is defined as the 8-week (56 day) period of your PPP loan beginning on the day the loan proceeds were deposited into your bank account. Under this approach, payroll costs during the 8-week period are considered paid and eligible for forgiveness on the day the paychecks are distributed, or the borrower originates an ACH credit transaction.
The SBA also allows for another approach for reporting payroll costs which is called the alternative payroll covered period. Borrowers with a weekly or bi-weekly payroll may elect to calculate eligible payroll costs using the 8-week (56 day) period that begins on the first day of the first pay period following the PPP loan disbursement. The SBA provides the following example to clarify the alternative payroll covered period which is based on when payroll costs are incurred rather than paid:
If the borrower received its PPP loan proceeds on Monday, April 20, and the first day of its first pay period following its PPP loan disbursement is Sunday, April 26th, the first day of the Alternative Payroll Covered Period is April 26 and the last day of the Alternative Payroll Covered Period is Saturday, June 20.
Reach out to our team if you have any questions on reporting payroll costs for the covered period or alternative payroll covered period. Stay tuned for future topics on the PPP loan forgiveness application.