Do leased employee payments count in determining payroll costs?

Posted by: Bonita Hatchett-Bodle    Apr 20, 2020 3:29:40 PM

Yes. The SBA FAQs addressed whether amounts paid to leased employees through a third-party payer such as a payroll provider or a professional employer organization (PEO) in order to process payroll and report payroll taxes constitutes PPP loan payroll documentation. This is important both for determining the amount of the borrower’s maximum loan amount and for documenting how loan proceeds are used for a loan made between February 15, 2020, and June 30, 2020, for loan forgiveness purposes.

Under the FAQs, the SBA recognized that eligible borrowers may use PEOs or payroll providers and that documentation provided by the payroll provider will indicate the amount of wages and payroll taxes reported to the IRS by the payroll provider for the borrower’s employees. Accordingly, that information is considered to be acceptable PPP loan payroll documentation. The SBA indicated that relevant information from a Schedule R (Form 941), Allocation Schedule for Aggregate Form 941 Filers, attached to the PEO’s or other payroll provider’s Form 941, Employer’s Quarterly Federal Tax Return, should be used if it is available; otherwise, the eligible borrower should obtain a statement from the payroll provider documenting the amount of wages and payroll taxes. In addition, employees of the eligible borrower will not be considered employees of the eligible borrower’s payroll provider or PEO.

Topics: Paycheck Protection Program, leased employees