PPP Loan Payroll Calculation for Pharmacies

If you have not yet applied for the Payroll Protection Program loan, eligible pharmacy businesses are still encouraged to submit an application to their local, participating or pharmacy niche banker.

In this video, Scotty Sykes, CPA, CFP,^® outlines the steps to calculate gross payroll as part of the computation of the PPP loan application, which helps you determine the amount of your loan request. He also gives a brief update on how loan forgiveness may be calculated, although that guidance is still pending.

Our pharmacy advisory services team is developing general operating procedures for pharmacies that do receive PPP loans. You will need to track and provide documentation of fund usage to support loan forgiveness down the road. For additional information, see our blog post about the PPP program.

Also, see our related video on the PPP FAQs.

If you prefer to read this content, the video transcript is below.

Yeah so, as of today, 4/20/2020, the PPP Program has been fully utilized, and there are no funds left available. However, there’s talk that this week another $250 or $300 billion will be available. And as a result, if you haven’t already applied, you need to go ahead and get in line and talk to your bank to get in line there. And you’re going to need to know what your payroll cost is. And there’s been a lot of confusion about that with the banks.

That confusion has somewhat been clarified, but we’ve still seen banks get this number wrong. So just as an applicant, you need to understand that. Payroll cost is your gross payroll, Medicare wages, box five on your 2019 W3. That’s the number you’re going to start with. You’re going to add back state unemployment tax, and any local tax that’s assessed based on income. You’re going to modify it for anyone that’s paid over $100,000. So you can’t go more than $100,000 when you’re determining that payroll cost number. And you’re going to add back health insurance and retirement that the employer has paid.

Now once you have that number, you’re going to divide by 12 and that’s going to give you your monthly payroll cost number. And then you multiply that by two and a half and that’s going to get you your PPP loan figure for this program.

Now for the forgiveness portion, payroll costs also include the same calculation. However, that has not been confirmed in guidance, yet. So there is somewhat a little confusion there. And when we’re talking about the $100,000 cap, that’s compensation only. That does not include health insurance and retirement. But again, back to the forgiveness area, we’re not sure exactly what that payroll cost is going to mean for forgiveness because you have to have at least 75% of the PPP funds used for payroll cost.

We’re assuming it’s going be the same calculation but again, that has not been confirmed. I can tell you I’ve heard some pharmacies say, think that payroll cost is the net payroll that’s coming out of their bank accounts when they pay the payroll every other week and that is not true. It’s a gross up number. There’s additions, there’s subtractions with the limitations, et cetera. So it is going to be a calculation. You need to be aware of that and we’re waiting on more guidance, exactly how it applies for the forgiveness.