PPP Loan Forgiveness Forms and FAQ
The SBA recently released its PPP Loan Forgiveness Application form. We are providing highlights and examples from the form below to help guide you through the process. If you have specific questions not covered here, please ask on our Community page where you can engage with business experts and other small business owners. The SBA has announced that it will begin accepting forgiveness application forms on August 10.
- You will submit this form to your PPP lender. Your lender may establish an online form for submitting this information.
- Additional documents you’ll need to submit:
- Payroll records
- Receipts and agreements for approved nonpayroll costs (mortgage interest, rent, utilities)
- Other documents deemed necessary by the SBA
EZ Forgiveness Form
Certain borrowers are eligible to fill out the EZ Form. Instructions for the EZ Form are available here. Borrowers are eligible to fill out the EZ form if they meet one of the following criteria:
- Are self-employed and have no employees; OR
- Did not reduce the salaries or wages of their employees by more than 25%, AND did not reduce the number or hours of their 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 their employees by more than 25%.
Covered Period and Alternative Payroll Covered Period
The Covered Period for your loan begins the day your loan was originated and lasts for 8 weeks or 24 weeks.
If you pay biweekly or more frequently, you can use the Alternative Payroll Covered Period in your payroll costs forgiveness calculations, with a start date of when your standard payroll period begins immediately after you originate the loan. The goal is to make payroll calculations easier. Some places on the application may ask for just the Covered Period, in which you cannot use the Alternative.
If you pay less frequently than biweekly, you cannot use the Alternative Payroll Covered Period method.
Payroll costs are considered paid on the day that paychecks are distributed or you originate an ACH credit transaction. Payroll costs are considered incurred on the day that the employee’s pay is earned.
Some payroll costs incurred before the start of the covered period can be forgiven if they were paid after the covered period begins. Likewise, payroll costs paid after the end of the covered period can be forgiven if they were incurred before the end of the covered period.
Non-payroll costs eligible for forgiveness are as follows, along with documentation needed to verify the expense:
- Mortgage interest
- Lender amortization schedule and receipts/checks; or
- Account statements from your lender from February 2020 and the months of the Covered Period through one month after the end of the Covered Period
- Copy of your lease agreement, as well as receipts/cancelled checks; or
- Account statements from the lessor showing payments from February 2020 and for one month after the end of the Covered Period
- Copy of invoices from February 2020 and those paid during the Covered Period, as well as receipts, cancelled checks, or account statements of those payments.
These costs can only be forgiven if they were paid during the covered period, or on the first due date after the covered period ends.
Owner-employees/general partners/self-employed compensation
This amount is capped at $15,384 or 8 weeks worth of your applicable compensation from 2019, whichever is lower. For self-employed individuals, this is your net profit from your 2019 Schedule C, divided by 52, multiplied by 8.
Payroll forgiveness reduction calculations and examples
Here is an example for how forgiveness would be reduced if an employee’s wages fall below the 60% threshold provided by the Paycheck Protection Program Flexibility Act.
- Employee’s salary was average annual salary was $60,000 between Jan 1., 2020 and March 31, 2020. The employee’s average annual salary for the chosen 8-week covered period was $30,000.
- $30,000/$60,000 = 50%
- If safe harbor (see below) doesn’t apply, forgiveness attributed to this employee would be reduced by $923.
- 60,000 * .60 = 36,000
- 36,000 - 30,000 = 6,000
- 6,000 / 52 * 8 = 923
Your forgiveness could be reduced if your average full time employee (FTE) count during the covered period is less than the average FTE count during any of the following periods (you choose the period):
- The period beginning on February 15, 2019 and ending on June 30, 2019; or
- The period beginning on January 1, 2020 and ending on February 29, 2020, or
- For a seasonal employer, as determined by the SBA, either of the two previous periods or any 12-week period between May 1, 2019 and September 15, 2019.
For example, using a $100,000 PPP loan: if you have 6.5 FTE from Jan 1.-Feb. 29, 2020, and 5.5 FTE during your 8-week covered period, your forgiveness would be reduced to roughly $84,615 (100,000 * 5.5 \ 6.5).
Note: This FTE reduction would not apply if you meet safe harbor and exclusion requirements noted below.
Here is an example of your expected forgiveness amount if your payroll costs are not 60% of the total loan size.
- PPP loan size: $100,000
- Eligible payroll costs: $40,000
- Eligible nonpayroll costs: $60,000
- Total forgivable amount: $66,667 ($40,000 for payroll and $26,667 for nonpayroll (40% of total forgivable amount)
FTE reduction exemptions and safe harbor
The following reductions do not affect forgiveness if:
- You made a good-faith, written offer to rehire an employee and they refused; or
- You fired an employee for cause; an employee voluntarily resigned; or an employee voluntarily requested a reduction in hours
- You demonstrate inability to return to same level of business activity before 2/15/20
- You are able to demonstrate an inability to rehire similarly qualified employees
Additionally, if you reduced hours and/or headcount between February 15 and April 26, 2020, and restored your FTE employee count to your February 15 levels by Dec. 31, 2020, then you are exempt from the FTE forgiveness reduction.