June 23, 2020 …
If your business is struggling and you didn’t apply for the Paycheck Protection Program (PPP) loan, there is still some time. The application deadline for the PPP loan is June 30, 2020. And, as of last Tuesday, some $130 billion in PPP loans were still available.
Last week, the Small Business Administration (SBA) released an updated PPP loan forgiveness application (Form 3508). The new form reflects changes that were made by the Paycheck Protection Flexibility Act of 2020, which became law effective June 5. The SBA also released an abridged Form 3508EZ for those meeting certain requirements, which we will address shortly.
CHANGES TO THE PPP APPLICATION
Some of the notable changes in the application are:
- Health insurance costs for S corporation owners cannot be included when calculating payroll costs. However, retirement costs for S corporation owners are eligible costs.
- Safe harbors for excluding salary and hourly wage reductions and reductions in the number of employees (full-time equivalents) from loan forgiveness reductions can be applied as of the date of the loan forgiveness application is submitted. You don’t have to wait until December 31 to apply for forgiveness to use the safe harbors.
- If you received PPP loans before June 5, you can choose between using the original eight-week covered period or the new 24-week covered period. The covered period is the duration during which you can spend the funds and still qualify for loan forgiveness.
Download/Print Form 3508 here: FORM 3508
The EZ Application requires less documentation and fewer calculations than the full PPP application. It should be used if you:
- Are self-employed and have no employees;
- Did not reduce the salaries or wages of your employees by more than 25%, and did not reduce the number or hours of your employees; or
- Experienced reductions in business activity as a result of health directives related to COVID-19, and did not reduce the salaries or wages of your employees by more than 25%.
Download/Print Form 3508EZ here: FORM 3508EZ
PPP IN BRIEF
Over the past months, we have written quite a bit about the PPP loan. It’s a loan designed to help support small businesses facing economic hardship created by the pandemic.
PPP funds are available to businesses that were in operation on February 15, 2020 with 500 or fewer employees. The minimum term for PPP loans is now five years. The proportion of PPP funding that MUST be used on payroll costs to qualify for full forgiveness is 60%.
If you are struggling financially and need help filling out the loan application, call us. We can help you navigate through the nuances.
As always, we are in your corner. If you have any questions, give us a call.
Team Legacy CPA