Last evening, on May 15, 2020, the Small Business Administration (SBA), in consultation with the Department of the Treasury, released the Loan Forgiveness Application and instructions for small businesses who applied for and received funds from the Paycheck Protection Program (PPP). Included within the application is the PPP Schedule A along with several worksheets, which calculate the long-awaited Loan Forgiveness Amount.
The Form gives guidance on one of the biggest questions regarding the forgiveness calculation with the PPP Schedule A. The PPP Schedule A, line 11 instructions define how the SBA has determined the FTEs for the first of the two reduction calculations which compares the average weekly FTE employees during the covered period (eight weeks) to the chosen reference period. These FTEs are based on a 40-hour week. There is also a simplified method available.
There is clarity on the “costs incurred but not paid” questions. The Application does not provide any flexibility on the start date of the eight-week covered period or extending the eight-week period, but does allow the taxpayer to align their calculations with their payroll schedules. There is also a new exemption from the loan forgiveness reduction for borrowers who have made a good-faith, written offer to rehire workers that was declined. In addition, the application has a page of representations and certifications that the business owner must attest to, as well as a paragraph on the penalties for making false statements that the business owner must also acknowledge.
Next week, it is expected that the AICPA will make additional recommendations to the US Treasury and SBA to clarify and simplify the complex loan forgiveness application. The AICPA has also indicated that they will update their more detailed, user-friendly loan forgiveness calculator and publish it on Monday, May 18, 2020 to assist small businesses with completing the application as it is now written. We will email you a link for the AICPA’s calculator as soon as it becomes available. The calculator will also be available at the AICPA’s SBA web page.
The SBA has promised to issue regulations and further guidance to assist borrowers as they complete their applications and to provide lenders with guidance on their responsibilities.
You may access the PPP Loan Forgiveness form and instructions on the SBA’s website.
Should you have any questions, please don’t hesitate to reach out to your tonneson + co representative.