Forgiveness Guide - Paycheck Protection Program

SBA Paycheck Protection Program Forgiveness Guide

Importantly, up to 100% of each of these loans may be forgiven if borrowers comply with certain requirements imposed by law and the Small Business Administration (“SBA”). Such requirements include mainly that the recipient of a PPP loan uses the borrowed monies to cover eligible costs and maintain its payroll during the crisis.

When determining what portion of a PPP loan could be forgiven, the amount eligible for forgiveness must be determined. Then, certain deductions required by applicable laws and regulations must be made to such eligible amount.

You can apply for forgiveness using the Form 3508EZ if at least one of the following applies to you:

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).
The Borrower did not reduce annual salary or hourly wages of any employee by more than 25 percent during the Covered Period or the Alternative Payroll Covered Period (as defined below) compared to the period between January 1, 2020 and March 31, 2020 (for purposes of this statement, “employees” means only those employees that did not receive, during any single period during 2019, wages or salary at an annualized rate of pay in an amount more than $100,000);
AND

The Borrower did not reduce the number of employees or the average paid hours of employees between January 1, 2020 and the end of the Covered Period. (Ignore reductions that arose from an inability to rehire individuals who were employees on February 15, 2020 if the Borrower was unable to hire similarly qualified employees for unfilled positions on or before December 31, 2020. Also ignore reductions in an employee’s hours that the Borrower offered to restore and the employee refused. See 85 FR 33004, 33007 (June 1, 2020) for more details.
The Borrower did not reduce annual salary or hourly wages of any employee by more than 25 percent during the Covered Period or the Alternative Payroll Covered Period (as defined below) compared to the period between January 1, 2020 and March 31, 2020 (for purposes of this statement, “employees” means only those employees that did not receive, during any single period during 2019, wages or salary at an annualized rate of pay in an amount more than $100,000);
AND

The Borrower was unable to operate during the Covered Period at the same level of business activity as before February 15, 2020, due to compliance with requirements established or guidance issued between March 1, 2020 and December 31, 2020 by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration, related to the maintenance of standards of sanitation, social distancing, or any other work or customer safety requirement related to COVID-19.

Click here to learn more about the EZ Application.

Provided that they were incurred during the 24-week period commencing on the date on which the PPP loan was disbursed, the following expenses will eligible for forgiveness:

Payroll Costs

Salary, wages, commissions
Payment of vacation, sick, parental/family/medical leave
Cash tips or the equivalent
State and local taxes assessed on payroll
Payment of group health coverage premiums
Payment of retirement contributions

Note: For an independent contractor or sole proprietor, payroll costs only include wages, commissions, income, or net earnings from self-employment, or similar compensation.

Non-Payroll Expenses

Rent for real properties that were in use before February 15, 2020
Utilities (electricity, gas, water, transportation, or internet access) for properties that were in use before February 15, 2020
Interest on commercial mortgage obligations for properties that were in use before February 15, 2020
Loan advance balance of SBA Emergency Injury disaster loans (known as EIDL) incurred between January 3, 2020, and April 3, 2020

Note: For an independent contractor or sole proprietor, you must have claimed these expenses on your 2019 Form 1040 Schedule C in order to claim them as expenses eligible for PPP loan forgiveness in 2020.

SBA Paycheck Protection Program Forgiveness Guide

What you need to know

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SBA Paycheck Protection Program Forgiveness Guide

What you need to know

Checklist

Calculator

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Additional Resources

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