New & Easier PPP Loan Forgiveness Applications Now Available

by | Jun 17, 2020 | Biz Taxes, COVID-19, Small Business

Last week, the SBA released a revised Paycheck Protection Program (PPP) loan forgiveness application and a new EZ application. These new applications reflect the changes that were made to the PPP by the Paycheck Protection Flexibility Act of 2020, which passed on June 5.

You can access the new applications here:

Revised Application Changes

The revised PPP Loan Forgiveness Application includes several changes:

  • If you own an S corporation, you cannot include health insurance costs when calculating payroll costs; however, retirement costs are eligible.
  • Safe harbors for excluding salary and hourly wage reductions, as well as reductions in the number of employees, can be applied as of the date the loan forgiveness application is submitted. You do not have to wait until December 31 to apply for forgiveness to use the safe harbors.
  • If you received your PPP loan before June 5, you can choose between using the original eight-week covered period or the new 24-week covered period.

New EZ Application Highlights

The new 3508EZ PPP Loan Forgiveness Application requires fewer calculations and less documentation than the full application. You can use the EZ application if you:

  • Are self-employed and have no employees;
  • Did not reduce the salaries or wages of your employees by more than 25% and did not reduce the number or hours of your employees; or
  • Experienced reductions in business activity as a result of health directives related to COVID-19 and did not reduce the salaries or wages of your employees by more than 25%.

New SBA Rules Issued

The SBA also issued updated rules last week for determining payroll costs and owner compensation in calculating PPP loan forgiveness under the new 24-week period.

Employees — The original PPP legislation allowed loan forgiveness for payroll costs of up to $15,385 per employee over the eight-week period ($100,000 annualized). The new rule for the 24-week period is three times the eight-week limit for full loan forgiveness, or $46,154 per employee.

Owners — If you file Schedule C, Profit or Loss From Business, or Schedule F, Profit or Loss From Farming, your PPP forgiveness calculations have also changed. For the eight-week period, the calculation is 8 ÷ 52 × 2019 net profit, up to a maximum of $15,385. For the 24-week period, the forgiveness calculation is limited to 2.5 months (2.5 ÷ 12) of 2019 net profit, up to $20,833.

Other PPP Modifications

The SBA made a few other changes to account for the Payroll Protection Flexibility Act:

  • The minimum term for PPP loans made on or after June 5 is now 5 years. For loans made before June 5, the minimum maturity remains at 2 years unless both the borrower and the lender agree to extend it to 5 years.
  • The proportion of PPP funding that must be used on payroll costs to qualify for full forgiveness drops to 60% from 75%.
  • The application deadline for PPP loans remains at June 30.

If you have any questions about the PPP loan changes, please don’t hesitate to contact us.

Source: Journal of Accountancy

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