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Completing Your PPP Loan Forgiveness Application

The process of completing the Paycheck Protection Program (PPP) loan forgiveness application can seem intimidating, but it doesn’t have to be. You have three application form options: Form 3508S, Form 3508EZ, and Form 3508. Here’s a brief overview of the three applications and how to complete them.

PPP loan forgiveness application

Form 3508S

Form 3508S is available to borrowers who received PPP loans of $50,000 or less. It’s the easiest PPP loan forgiveness application to fill out, as you are exempt from reductions in loan forgiveness due to any reductions in full-time equivalent (FTE) employees and reductions in employee salaries and wages.

Filling out the actual application is very simple. You total up all your forgivable costs, both payroll and non-payroll. The amount that you report on page 1 of the Form 3508S is the lesser of the following three amounts:

  1. The sum of your forgivable amounts
  2. The principal amount of your PPP loan
  3. The payroll costs divided by 60%

Small borrowers are not required to show their math on this form but do still have to provide the necessary documentation to support the forgivable amounts they are reporting.

Form 3508EZ

When you apply online for loan forgiveness, the applications ask important questions at the beginning of the process on page 1 of the paper instructions to Form 3508EZ. They center around your ability to be exempt from reductions in loan forgiveness due to reductions in headcount (or FTEs) and reductions in salary and wages. You can use Form 3508EZ if you can meet one of the following three requirements:

  1. You are self-employed, an independent contractor, or a sole proprietor who had no employees at the time of the PPP application
  2. You did not reduce the annual salary or hourly wages of any employee by more than 25% during the Covered Period compared to the 1st quarter of 2020, and you did not reduce the number of employees or average paid hours of employees between 1/1/2020 and the end of the Covered Period
  3. You did not reduce the annual salary or hourly wages of any employee by more than 25% during the Covered Period compared to the 1st quarter of 2020, and you experienced reductions in business activity as a result of health directives related to COVID-19

If you can use this form, then like Form 3508S, you have no reductions in the forgivable costs due to headcount (or FTEs) and salary and wage reductions (but this time, it’s because you qualified for them). To complete the form, add up the forgivable costs, both payroll and non-payroll.

Unlike Form 3508S, borrowers must show the math on this form. Like all of the PPP loan forgiveness application forms, you have to provide the necessary documentation to support the forgivable amounts you report on the form.

Form 3508

If, while applying, you were unable to answer yes to one of the three requirements mentioned previously, you will have to complete Form 3508. This form requires you to disclose much more information, as evidenced by the five pages it contains.

The best approach to attacking this form is to start on Page 4, the Schedule A Worksheet, with Schedule A being the application’s Payroll Cost section. This worksheet is broken into two tables, with Table 1 being used to report the information for employees paid an annualized cash compensation of $100,000 or less in 2019. Table 2 is used to report information for employees paid an annualized cash compensation of over $100,000 for any pay period in 2019.

Table 1

Table 2

One difference you will notice on these tables is that there is no column in Table 2 for Salary or Wage Reduction. You can see that these tables have limited space, so the SBA will accept a report from your payroll system or your third-party payroll provider. This information should show the cash compensation for the Covered Period that was chosen for this application.

Contact Us for Help in Completing Your PPP Loan Forgiveness Application

This is just a brief overview of the different PPP forgiveness applications and how to complete them. If you need assistance filling out your PPP loan forgiveness application form, would like us to review your application, or have any other questions or concerns, we’re here to help. Please email info@hoffmancpas.com or call 443-320-4101.

This entry was posted on Tuesday, November 17th, 2020 at 11:34 am. Both comments and pings are currently closed.