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Revised PPP Loan Forgiveness Application and New EZ Form for Certain Borrowers

Revised PPP Loan Forgiveness Application and New EZ Form for Certain Borrowers

June 18, 2020
By Tonneson
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On June 17, the Small Business Administration (SBA) and Treasury released a revised Paycheck Protection Program (PPP) loan forgiveness application and a new EZ form for certain borrowers. These applications encompass the changes made to the PPP under the Paycheck Protection Program Flexibility Act (PPPFA) signed into law by President Trump on June 5, 2020. Below are links to these new applications, along with a link to the SBA’s latest Interim rule also issued on June 17 which clarifies how to calculate the employee and owner compensation in the expanded covered period of 24 weeks, created by the PPPFA.

The new SBA Interim rule gives guidance on how the extended 24-week period affects the calculation of the wage limit caps for employees and owners. As a result of the PPPFA, the new limit on employee wages in excess of $100,000 is $46,154 for the 24-week period and for self-employed owners (filing a schedule C or F for their business) the calculation is limited to 2.5 months’ of wages from 2019 net profit, up to $20,833. This limitation was put in place to prevent self-employed owners who lay off employees and claim a safe harbor from reduction of amount of loan that can be forgiven from a windfall due to the 24 month extension, which was not intended by the CARES Act that sought to keep employees working.

You may view the SBA Interim rule on the SBA website.

The new loan forgiveness applications include additional guidance and clarity on the PPP calculations and forgiveness rules. Specifically:

  • S Corporation owners can include retirement costs but not health insurance costs in the calculation of “Payroll Costs” which can be included in the debt forgiveness application.
  • Borrowers don’t have to wait until Dec. 31 to apply for forgiveness to use the safe harbors.
  • Borrowers can use safe harbor calculations for excluding wage reductions and reductions in the number of employees from loan forgiveness reductions as of the date the loan forgiveness application is submitted.
  • Borrowers that received loans before June 5 can choose between using the original eight-week covered period or the new 24-week covered period.

The new EZ form can be used if :

  • 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 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 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.

Below are links to the forms and instructions:

These new laws and guidance have given the borrower welcome relief with the flexibility and simplifying of the process for applying for PPP loan forgiveness, but there are still many areas of uncertainty. It is expected that in the next few weeks the SBA will update their FAQs and Congress will continue to pass laws to include clarity in defining transportation costs, timing in applying for forgiveness during the 24-week period, deductibility of expenses associated with loan forgiveness amounts, and a myriad of other questions borrowers and their advisors still have in navigating the complexities of the program.

We will continue to keep you updated. Should you have any questions, please don’t hesitate to reach out to your tonneson + co representative.