New: Under the American Rescue Plan Act, signed in to law March 11, 2021, some provisions of the Paycheck Protection Program (PPP) have been revised, including expansion of eligibility. Previously, the Consolidated Appropriations Act, 2021, also amended PPP provisions such as loan forgiveness.
Although the Small Business Administration stopped accepting PPP loan applications May 4, 2021 from most lenders, funding might remain for lenders designated as community financial institutions (CFI). Find a CFI.
The process of applying for loan forgiveness can get complicated, so it’s important to understand what it entails so you potentially can maximize your forgiveness amount and your time in preparing the materials to complete the application. Recipients of a PPP will have 10 months after the loan distribution date to apply for forgiveness.
The SBA released the PPP Loan Forgiveness Application and additional guidance. Borrowers can use the application to calculate their loan forgiveness amount.
You’ll need the following material to complete the application:
- Borrower and loan Information
- Payroll costs from your chosen covered period
- Non-payroll costs from your covered period
- Your full-time equivalent (FTE) employee count
The SBA also released a PPP Loan Forgiveness Application Form 3508EZ (EZ Form) for certain PPP borrowers to use, if eligible.
The EZ Form still requires the borrower to do calculations, provide documentation, but not as much as compared to the full form, and certification. There is also an optional Demographic Information Form. However, the EZ Form is half the size of the revised full form – two pages rather than four.
Borrowers will be required to provide support for payroll and non-payroll costs, and may be asked to do the same for full-time equivalent (FTE) employee counts. As with the full form, borrowers also need to save documentation for proof of certifications. The EZ Form instructions provide more details.
What to know when filling out the full PPP forgiveness form
For the loan forgiveness application, all borrowers must submit a PPP Schedule A and the PPP Loan Forgiveness Calculation Form. Additionally, you must certify the Loan Forgiveness Application and provide support for payroll and non-payroll costs, and full-time equivalent (FTE) employee counts.
To assist in completing the Schedule A, there is a Schedule A Worksheet (optional). You are not required to use the provided worksheet but must create and retain either the worksheet or its equivalent to support your application.
- PPP Loan Forgiveness Calculation Form
- PPP Schedule A
- PPP Schedule A Worksheet
- Borrower certifications
When can the PPP loan forgiveness EZ Form be used?
The EZ Form can be used on any size loan if a borrower can check one of numbered scenarios below and certify the selection.
1. The borrower is a self-employed individual, independent contractor, or sole proprietor who had no employees at the time of the PPP Loan application and did not include any employee salaries in the computation of average monthly payroll in the Borrower Application Form (SBA Form 2483).
2. The borrower did not reduce annual salary or hourly wages of any employee by more than 25% during their Covered Period or Alternative Payroll Covered Period compared to the period of Jan. 1, 2020 and March 31, 2020. “Employees” means only those individuals who did not receive wages or salary at an annualized rate in an amount of more than $100,000 during any period of 2019, and either:
- They did not reduce the number of employees or the average paid hours of those employees from Jan. 1, 2020 to the end of their Covered Period. The borrower can ignore:
- Reductions that arose from an inability to rehire individuals who were employees on Feb. 15, 2020, if the borrower was unable to hire similarly qualified candidates for unfilled positions on or before Dec. 31, 2020, and
- Reductions in an employee’s hours that the borrower offered to restore but the employee refused
- They were unable to operate during the Covered Period at the same level of business activity as before Feb. 15, 2020, due to compliance with established requirements of or issued guidance on maintaining standards of sanitation, social distancing, or any other work or customer safety requirement related to COVID-19 called for between March 1, 2020 and Dec. 31, 2020.
Any borrowers unable to certify to at least one of these statements would not qualify to use the EZ Form and should complete the full forgiveness application.
What are the differences between the EZ Form and the full PPP loan forgiveness application?
The two-page EZ Form has eight lines for forgiveness calculations, compared to the full form’s 11, and requires borrowers to provide the following (numbers match the lines on the application):
- Payroll costs
- Mortgage interest payments
- Rent or lease payments
- Utility payments
- Potential forgiveness amount (add lines 1-4)
- Loan amount
- Payroll cost 60% requirement (divide line 1 by 0.6)
- Forgiveness amount (the smallest of lines 5, 6, and 7)
There are many similarities between the EZ Form and the revised full application. Lines 1 to 4 are the same, while lines 6 to 8 on the EZ Form match lines 8 to 11 in the full form. The main difference is the addition of three lines on the revised full form (5 to 7), which requires borrowers to include information from the PPP Schedule A to account for full-time equivalency (FTE) and salary/hourly wage reduction adjustments.
Need help with the EZ Form or full application for PPP loan forgiveness?
Borrowers will need a lot of information to complete an application for PPP loan forgiveness, and the process is complicated. Payroll providers can help. Paychex has developed a PPP Loan Forgiveness Estimator, including one specifically for its Paychex Flex® customers that automatically populates sections it has data for, that helps make the complex process simpler. The estimator walks borrowers through what they’ll need to complete the PPP Schedule A, explains the FTE reductions, and even helps with the calculation of FTEs. There is also a robust FAQ section available that goes into more details borrowers need to understand the PPP loan forgiveness application process.