Are federal taxes included in determining payroll costs?

Posted by Bonita Hatchett-Bodle

Apr 20, 2020 3:23:44 PM

The Small Business Administration's FAQs addressed the method borrowers must use in order to account for federal taxes when determining payroll costs for maximum loan determination and for the allowable uses for Paycheck Protection Program (PPP) loan proceeds. The SBA clarified that payroll costs are calculated on a gross basis without regard to (i.e., not including subtractions or additions based on) federal taxes imposed or withheld, such as the employee’s and employer’s share of Federal Insurance Contributions Act (FICA) tax and income taxes required to be withheld from employees. As a result, payroll costs are not reduced by taxes imposed on an employee and required to be withheld by the employer, but payroll costs do not include the employer’s share of payroll tax.

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Topics: payroll costs, Paycheck Protection Program, federal taxes