Updated Paycheck Protection Program Loan Forgiveness Applications Released
Updated Paycheck Protection Program (PPP) Loan Forgiveness Applications have been released by the US Small Business Association and Treasury Department in an effort to make the process easier for borrowers as well as reflect the changes from the recent passage of the Paycheck Protection Program Flexibility Act. Two versions of the Loan Forgiveness Applications are now offered to borrowers.
Highlights of the PPP Loan Forgiveness Applications
The full Loan Forgiveness Application has been shortened from eleven pages to five pages.
Both applications give borrowers the option of using the original eight-week covered period (if their loan was made before June 5, 2020) or the extended 24-week covered period.
They include how to calculate forgiveness inclusive of the newly revised 60% payroll cost requirement.
Health insurance costs for S corporation owners cannot be included when calculating payroll costs; however, retirement costs for S corporation owners are eligible costs.
They also include the addition 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.
Loan Forgiveness Application Form EZ
A new, shorter version of the loan forgiveness application is available for certain borrowers. It requires less calculations and documentation than the full application. The three-page form can be used by borrowers that:
- Are self-employed, independent contractor, or sole proprietor that had no employees at the time of the PPP loan application; or
- Didn’t reduce annual wages or salaries of any employee by more than 25% during the covered period or alternative payroll covered period as compared to Q1 2020 AND the borrower did not reduce the number of employees and the average paid hours of employees between January 1, 2020 and the end of the covered period (ignoring reductions from the inability to rehire individuals and reductions in hours offered to be restored and refused); or
- Didn’t reduce annual wages or salaries of any employee by more than 25% during the covered period or alternative payroll covered period as compared to Q1 2020 AND the borrower was unable to operate during the covered period at the same level of business activity as before February 15, 2020 as a result of health directives related to COVID-19 between March 1, 2020 and December 31, 2020.
New Interim Final Rule
The SBA issued a new interim final rule on how to determine payroll costs and owner compensation when calculating PPP loan forgiveness under the new 24-week covered period.
The new interim final rule establishes the 24-week maximum amount for forgiveness at $46,154 per employee or $15,385 per employee for the 8-week covered period (plus covered benefits for employees). For owner compensation replacement, the forgiveness calculation is limited to 2.5 months’ worth of 2019 net profit, up to $20,833 for the 24-week period or up to $15,385 for those electing the 8-week period.
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