PPP Forgiveness for S-Corp non-W-2 Owner-Employee Distributions

ellaprint

Just took an informative webinar in which Brian and David presented on small business relief opportunities and found that my company may indeed be eligible to get forgivable PPP assistance.

We are an S-Corp with no W-2's and only pay out periodic distributions to our two owner employees.

I had previously been told by a potential lender that without W-2 employees the business was not eligible to apply.
Based on the information in Brian and David's webinar, it appears that the situation may have changed.

What information do I need to verify our eligibility and successfully get through the application process?

Appreciate any insight that will help us navigate this process,
Audry

Brian_SBM

@ellaprint Thanks for writing. Your lender was correct in that owner draws are not eligible for PPP, since they are not taxed. As an S-Corp owner, though, you are required to pay yourself a reasonable salary and pay taxes on that amount. Whatever that amount is should qualify you for PPP. K-1 distributions are not covered, but whatever the owner/employees reasonable compensation is should.

ellaprint

Hi Brian,
Thank you so much for your response.
Makes good sense - I'm feeling much more confident about how to move forward in conversation with potential PPP lenders.
Thank you,
Audry

klentz426

I am unsure what owner draws are but dividends are taxed. So if you have a payroll that paid through payroll company and that has reached its max for double fica and now you are under dividend payments so you do not have 941s and you have to pay directly to the state and federal governments your taxes, how do send documentation of those dividend payments by your K-1 form you create end of the year?

Brian_SBM

@klentz426 It's my understanding that K1 distributions are not considered for PPP eligibility, only the payroll portion of your earnings.