New EZ Loan Forgiveness Application introduced along with clarifying answers

The EZ Loan Forgiveness Application Form

The 3508EZ Application requires fewer calculations and less documentation for eligible borrowers.

In summary, you can use the EZ Form if you can say 'yes' to one of these three items:
  1. I am self-employed and have no employees.
  2. I did not reduce the salaries or wages of employees by more than 25% during the Covered Period or Alternate Covered Period as compared to the first quarter of 2020, AND did not reduce the number of employees or the average paid hours of employees from January 1, 2020 to the end of the Covered Period or Alternative Covered Period.
  3. I did experience reductions in business activity post-February 15, 2020 as a result of health directives related to COVID-19, AND did not reduce the salaries or wages of employees by more than 25%.

Both the Full and EZ versions of the Loan Forgiveness Applications give borrowers the option of using the original 8-week Covered Period (if their loan was made before June 5, 2020) or extended 24-week Covered Period. These changes will result in a more efficient process and make it easier for businesses to realize full forgiveness of their PPP loan.

The EZ application form and instructions can be found by clicking the links below.
Clarifying Answers

We now have clarification on some of our open questions, mainly as they relate to the income caps due to the 24-week extended period. They also clarified to whom the “employee benefit” deductions apply. In some cases for certain owners, partners or self-employed persons, the health benefits or retirement contributions will not count as additional qualifying expenses for purposes of forgiveness (see below). This may not matter in most cases due to the ability to now calculate payroll and non-payroll expenses over 24 weeks vs. the original 8 week Covered Period and thus Borrowers may now reach 100% forgiveness in the majority of cases where the workforce hasn’t been dramatically diminished. Note that the potential reductions in forgiveness could still apply if certain employee Wage/Salary or Full Time Equivalent count reductions apply.  
 

Cash Compensation
The sum of gross salary, gross wages, gross tips, gross commissions, paid leave (vacation, family, medical, or sick leave not including leave covered by the Families First Coronavirus Response Act), and allowances for dismissal or separation paid or incurred during the Covered Period or the Alternative Payroll Covered Period. For each individual employee, the total amount of cash compensation eligible for forgiveness may not exceed an annual salary of $100,000, as prorated for the Covered Period. For an 8-week Covered Period, that total is $15,385. For a 24-week Covered Period, that total is $46,154 for purposes of this 3508EZ. You can only include compensation of employees who were employed by the Borrower at any point during the Covered Period or Alternative Payroll Covered Period and whose principal place of residence is in the United States.

Employee Benefits
The total amount paid by the Borrower for:
  1. Employer contributions for employee health insurance, including employer contributions to a self-insured, employer-sponsored group health plan, but excluding any pre-tax or after-tax contributions by employees. Do not add employer health insurance contributions made on behalf of a self-employed individual, general partners, or owner-employees of an S-corporation, because such payments are already included in their compensation.
  2. Employer contributions to employee retirement plans, excluding any pre-tax or after-tax contributions by employees. Do not add employer retirement contributions made on behalf of a self-employed individual or general partners, because such payments are already included in their compensation, and contributions on behalf of owner-employees are capped at 2.5 months’ worth of the 2019 contribution amount.
  3. Employer state and local taxes paid by the borrower and assessed on employee compensation (e.g., state unemployment insurance tax), excluding any taxes withheld from employee earnings.

Owner Compensation
Includes any amounts paid to owners (owner-employees, a self-employed individual, or general partners). For a 24-week Covered Period, this amount is capped at $20,833 (the 2.5-month equivalent of $100,000 per year) for each individual or the 2.5-month equivalent of their applicable compensation in 2019, whichever is lower. For an 8-week Covered Period, this amount is capped at 8/52 of 2019 compensation (up to $15,385).

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