The Small Business Administration (SBA), in consultation with US Treasury, has released a revised loan forgiveness application for the Paycheck Protection Program (PPP). In addition, the SBA released a new EZ application for forgiveness of PPP loans. The applications reflect recent changes to the PPP, in particular:
- new guidance on how to calculate employee and owner compensation for loan forgiveness in the new 24-week covered period from eight weeks
- a reduction of the proportion of proceeds that must be spent on payroll costs to 60% from 75%
- the establishment of a safe harbor for businesses that have been unable to return to the level of business activity they had before the COVID-19 pandemic due to compliance with health and safety guidelines for slowing the spread of the virus
- Health insurance costs for S corporation owners cannot be included when calculating payroll costs, but retirement costs for S corporation owners are eligible costs
- Safe harbors for excluding salary and hourly wage reductions and reductions in the number of full-time equivalent employees from loan forgiveness reductions can be applied as of the submission date of the loan forgiveness application. Borrowers do not have to wait until December 31 to apply for forgiveness to use the safe harbors.
- Borrowers that received loans before June 5 can choose between using the original eight-week covered period or the new 24-week covered period.
New EZ application
This new loan forgiveness application requires fewer calculations and less documentation than the full application. It can be used by borrowers who meet one of the following three criteria:
- are self-employed and have no employees
- did not reduce the salaries or wages of their employees by more than 25% and did not reduce the number of employees or the average paid hours of their employees, or
- experienced reductions in business activity resulting from health directives related to COVID-19 and did not reduce the salaries of their employees by more than 25%
Please contact your R&A advisor for assistance with filing and with any questions you may have. We will continue to keep you advised as updates are available.
About this Author
Amy leads R&A's tax department. Her focus is individual and business tax compliance and consulting with an emphasis on working with clients through all stages of their business and life. Amy's clients span a variety of fields including manufacturing, medical practices, and hospitality. She also is accredited in business valuations and assists clients in valuations for business transition planning and estate and gift planning.