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With most states under lockdown measures, the economy has largely ground to a halt. Most businesses are suffering, but small businesses and the self-employed in particular are taking it on the chin. The federal government, though, is offering coronavirus crisis relief through the newly created Paycheck Protection Program (PPP). Allocated $349 billion (and an additional $300 billion possibly this week), the program provides forgivable loans to qualifying businesses. If you’re a small business owner trying to make payroll, our calculator can show you what you can get through the program.
![]() Calculate Your PPP Loan Amount
The maximum amount of money you can borrow from the PPP is equal to 2.5 times your average monthly payroll costs or $10 million, whichever is lower. You should exclude from your calculation of average monthly payroll costs any compensation in excess of $100,000 per employee. But you can include payment for vacation, parental, family, medical and sick leave (that is not covered by another emergency loan/grant); payment for dismissal or separation; payment for group health care coverage, including insurance premiums; payment for retirement benefits and payment of state and local taxes assessed on employees’ compensation.
To calculate your payroll costs, you can use averages costs from calendar year 2019 or from the previous 12 months. If your business launched in July of last year or later, you can use the average monthly costs from January 1, 2020 to February 29, 2020. (Many banks are telling applicants with older businesses to use this year’s numbers if they are more favorable to them than last year’s.) If you are a seasonal business, you can use the numbers from February 15, 2019, or March 1, 2019, to June 30, 2019.
Additionally, you can add to your total loan amount the outstanding amount of any Economic Injury Disaster Loan (EIDL) made between January 31, 2020 and April 3, 2020, less any “advance” that is forgivable under an EIDL COVID-19 loan.
The calculator below will tell you how much you’ll be able to borrow through the PPP.
About the PPP Loan Program
The Coronavirus Aid, Relief, and Economic Security (CARES) Act contains several programs designed to help small businesses. The most prominent of these is the PPP, which the SBA classifies as a 7(a) loan. It is designed to help small businesses impacted by the crisis continue to make payroll without having to cut salaries or lay off workers. It also incentivises small businesses to rehire already laid-off workers and restore any salaries that have been cut.
The main appeal of PPP loans is that a large percentage of each loan can be forgiven if certain headcount and payroll criteria are met. Small business owners may receive only one PPP loan, though they can also apply for an Economic Injury Disaster loan as long as the two loans cover different costs.
As of April 16, the SBA had approved all of its allocated funds to loans. It has been informing lenders that it is no longer accepting applications. There is so much remaining demand though, that Congress is expected to approve additional funding this week.
Who Qualifies for a PPP Loan?
Small business with 500 or fewer employees may be eligible. Small businesses, S corporations, C corporations, LLCs, private nonprofits, tribal groups, veteran groups and faith-based organizations can all qualify. What’s more, self-employed people who file an IRS Schedule C with their Form 1040, such as sole proprietors and independent contractors, are also eligible, though they must have been in operation on Feb. 15, 2020, and have the U.S. as their principal place of residence. (Partners who report self-employment income from partnerships are not eligible, however.)
Restaurants and hospitality businesses also make the cut if they have 500 or fewer employees per location. Details on the size standards and exceptions are on the SBA website.
Applicants more than 60 days delinquent on child support obligations, farms and ranches, sex businesses, lobbyists, gambling establishments and businesses involved in illegal activities don’t qualify.
Terms of PPP Loans
Loans offered by the PPP are 100% forgivable if businesses meet certain criteria. This means that the loan essentially functions as a grant – aka free money – if you meet the conditions laid out in the CARES Act.
Eight weeks of payroll costs, plus accrued interest on the PPP loan, will be forgiven as long as the full-time headcount and payroll at a firm stay the same as they were on average in 2019 (or within the past 12 months – your bank will say how it is counting), between February 15, 2019 and June 30, 2019 (if you use seasonal workers) or between January 1, 2020 to February 29, 2020 (if you launched your business in July last year or later.) Businesses that have already cut salary or laid off employees have until June 30, 2020 to rehire staff and reinstate salaries to pre-crisis levels. The CARES Act also states that the part of the loan that covers mortgage interest, rent and utilities during the eight weeks after receipt of the loan will also be forgiven, but because of funding limitations, the SBA has capped non-payroll costs that can be forgiven at 25% of the loan. (It’s expected that Congress will clarify things when it approves the next round of PPP funding.)
Any part of the loan that is not forgiven (you’ll have to request forgiveness from the SBA and prove that you used the money to cover payroll, etc.) will be due in full in two years, with payments deferred for six months. The interest rate is fixed at 1.00%. Remember that if you don’t maintain headcount and payroll at pre-pandemic levels, the amount that is forgiven will be reduced.
You can submit an application for a PPP loan through a local lender. Some are still accepting applications in anticipation of the program reopening, while others are telling borrowers just to get their applications ready. If you are looking for a lender to work with, check our guide to PPP loan providers and their requirements (we are continually updating it).
Tips for Surviving the Recession
Photo credit: ©iStock/Stork
401k / 457b / 403b Calculators.Individual Retirement Account Calculators.Retirement Calculators.Saving Calculators.Investment Calculators.Paycheck and Benefits Calculators.Automotive Calculators.Business Calculators. Calculators are for estimation purposes only, and are not financial planning or advice. As with any tool, it is only as accurate as the assumptions it makes and the data it has, and should not be relied on as a substitute for a financial advisor or a tax professional.
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