How To Fill Out Your PPP Forgiveness Application
How To Fill Out Your PPP Forgiveness Application
As of June 16, 2020 there are now two different applications that can be filled out when it’s time to apply for forgiveness on your PPP loan. One of them—Form 3508EZ—is much shorter and simpler than the other. But you need to meet certain criteria to be eligible to us the EZ form when applying for your PPP loan forgiveness.
Who can use Form 3508EZ to apply for PPP Loan forgiveness?
There are three different scenarios outlined in which you can use the simplified form to apply for forgiveness. Check the box that applies to you and if both cases 2 & 3 apply to you, you can check both boxes:
You are a self-employed individual, independent contractor, or sole proprietor with no employees at the time of the PPP loan application and did not include any employee payroll expense in the average monthly payroll expense calculation on that application. If this applies to you, here are your next steps.
You certify that you did not reduce annual salary or wages by more than 25% during the chosen 8 or 24 week period compared to Q1 2020 AND the number of employees or average paid hours of employees was restored to their averages by the end of the chosen period. You can ignore reductions that were due to an inability to rehire individuals, hire a similarly qualified employee, or restore hours in the case of an employee’s refusal. This is essentially you certifying that you did not breach the terms of headcount reduction. If this applies to you, here are your next steps.
You certify that you did not reduce annual salary or wages by more than 25% during the chosen 8 or 24 week period compared to Q1 2020 AND you were unable to operate at the same level of business activity due to compliance with requirements related to any work or customer safety requirement related to COVID-19. If this applies to you, here are your next steps.
Filling out business and PPP loan information
You will be required to provide the following information regarding your business and loan:
Business Legal Name/DBA or Tradename, if applicable: This should be the same business name used on your PPP application and match your tax returns. Provide a DBA if what appears on the supporting documents varies from your legal name.
Business Address/Business TIN (EIN, SSN)/Business Phone/Primary Contact/E-mail Address: Use the same information as your original PPP application unless it’s changed.
SBA PPP Loan Number: This will be the E-tran number generated by the SBA. Each loan has a corresponding E-tran number and if you cannot find your number, contact your lender as they will have it on file.
Lender PPP Loan Number: This is the number assigned to your loan by your lender and will be available on your signed loan documents. If you cannot find your number, your lender will have it on file.
PPP Loan Amount: The full loan amount you received. This can be confirmed in your bank activity, on the loan agreement, or in a confirmation email. There should have been no charged fees or amounts otherwise taken away.
PPP Loan Disbursement Date: The date the funds arrived in your bank account. This can be confirmed in your bank account activity. If you received the funds in stages, enter the first date.
Employees at Time of Loan Application/Employees at Time of Forgiveness Application: The actual amount of employees, not Full-Time Equivalents (FTE). For example, one full-time and one part-time employee would count as two total employees.
EIDL Advance Amount: If you received an EIDL advance, enter this amount. It will range from $1,000 to $10,000 in increments of $1,000.
EIDL Application Number: Should be in correspondence from the SBA confirming they received your application. Include this regardless of whether you were approved or not.
Payroll Schedule: Select the frequency of payroll being run in the 8 to 24 week period.
Covered Period: The 24 week period starting from your disbursement date (but not past December 31, 2020)
Alternative Payroll Covered Period: Only applicable if you run payroll weekly or biweekly. You can start your covered period on the day of your first pay period. This will be the covered period for all parts of the application that call for it.
If Borrower (together with affiliates, if applicable) received loans in excess of $2 million: Check this box if applicable.
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Filling out your payroll information
If you did not reduce headcount and/or you were unable to return to full operations in compliance with work or customer safety due to COVID-19, the form will require you to report all applicable payroll costs in Line 1.
Line 1: You will report all eligible payroll expenses that you are applying for forgiveness on. This will include:
Gross salary, wages, tips, commissions, and paid leave (capped at $100k annualized per employee, $46,154 within the the 24 week period)
Allowances for dismissal or separation paid or incurred in the covered period
Group employee benefits including employee health insurance, retirement plans, and state and local taxes assessed on employee compensation excluding taxes withheld from employee’s pay
(For sole proprietors and partnerships) your Owner Compensation Replacement
Lines 2-4: Any applicable mortgage interest, rent/lease payments, or utilities payments you want to apply for forgiveness on.
Line 5: The sum of Lines 1-4.
Line 6: Your PPP loan amount.
Line 7: Line 1 divided by 0.6.
Line 8: The smallest value of Lines 5-7.
Documents required for you application
Here are the documents you’ll need to provide for your PPP loan forgiveness application to prove your expenses.
Bank account statements or a report from your payroll provider documenting payments to employees
Tax forms (or equivalent payroll provider reports) including:
Payroll tax filings reported (typically Form 941)
State quarterly business and individual employee wage reporting and unemployment insurance tax filings
Payment receipts, cancelled checks, or bank account statements showing employer contributions to group employee benefits plans
If you only checked the second box indicating you kept headcount and salaries the same on the instructions form, you will still be required to report the average number of full-time equivalent employees on payroll on January 1, 2020 and at the end of the covered period. This can be done with payroll reports covering January 1 and the last payroll of your covered period.
Business mortgage interest payments: a copy of the amortization schedule with corresponding receipts OR mortgage statements from February 2020 and the months of the covered period.
Business rent or lease payments: a copy of the current rent/lease agreement with receipts verifying payments OR lease statements from 2020 and from the covered period through one month after the end of the covered period.
Business utility payments: a copy of invoices from February 2020 and those paid during the covered period with corresponding receipts or account statements.
This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. PayNortheast assumes no liability for actions taken in reliance upon the information contained herein.