Calculating PPP Payroll Costs For a Partnership
or LLC When Applying for a PPP 2 Loan

COVID-19 Business Update
Tax Group

Below are the steps for calculating Payroll Protection Plan (PPP) payroll costs when applying for a PPP 2 loan:

  1. Find each partner’s individual compensation.

Compute each partner or member’s individual payroll costs by adding the following:

Net earnings from self-employment of individual U.S.-based general partners that are subject to self-employment tax from box 14a of IRS Form 1065 Schedule K-1, and subtract (i) any section 179 expense deduction claimed in box 12; (ii) any unreimbursed partnership expenses claimed; and (iii) any depletion claimed on oil and gas properties.

Multiply this amount by .9235. (The .9235 calculation removes the partnership entity’s share of self-employment tax).

If this amount is over $100,000, reduce it to $100,000.  If this amount is less than zero, set this amount at zero.

  1. Add all gross wages and tips paid to any employees. Include employee contributions for health insurance. Cap the combined total compensation of any individual employee to $100,000 if necessary, and exclude any employees who do not live in the US.
  2. Add employer contributions for employee health insuranceand employee retirement plans (IRS Form 1065 line 18), if applicable.
  3. Add 2019 state and local payroll taxes. (Federal taxes are excluded).
  4. Divide the total sum by 12. If your business was new, use the number of months your business was in operation for.
  5. Multiply the above amount by 2. This is your loan amount.

The information presented here should not be construed as legal, tax, accounting, or valuation advice. No one should act on such information without appropriate professional advice and after a thorough examination of the particular situation.