For over a year I’ve been answering the question, “when should we apply for PPP Loan Forgiveness?” And for over a year I’ve been responding, “not yet; there’s still so much that’s up in the air” — as AICPA (thankfully) recommended we wait for legislation from Congress as well as guidance from both the SBA and IRS.

Well, on June 24th, they gave us the green light in the AICPA Town Hall Series. Lisa Simpson said that if you have worked out the interplay between PPP and the Employee Retention Credit (ERC), then you should go ahead and apply.

This means that if you are a sole proprietor or partnership and have no employees, you are ready to apply — since ERC is only an issue if you have W-2 employees or are a W-2 employee of your own company. See my recent blog post for easy instructions.

It also means that if you have employees (or are an employee yourself), but you know that your company does not qualify for ERC, you are ready to apply. See below for less-than-easy but still DIY-worthy instructions.

(Of course, this means that if you qualify for ERC and haven’t worked out the interplay yet, you should consider holding off for now — consider using my recommended approach to moving forward with PPP Forgiveness without jeopardizing ERC, highlighted in a recent blog post.)

So… now what?

For borrowers of more than $150k who had no wage or FTE reductions, or who qualify for a safe harbor/exemption:

• As your loan was higher than $150k, you do not qualify to file the simplest PPP Forgiveness form (3508S). However, presuming you followed all the rules and had no reductions, you do qualify for the “EZ” form (3508EZ). Please make sure your lender allows you to use this approach. For reference, here is the forgiveness application form (pages 1-4) and instructions – but for the actual forgiveness process, instead of filling the form out, you will apply through your lender’s loan portal and it will walk you through the steps. Please carefully read through the checklist and instructions on pages 5-9.
  
• Please also read through this Form 3508EZ Step-by-Step guide before beginning the process at your lender’s portal, as the questions you will be asked mirror the actual application.

• Some important tips when going through the process:
  • Have your original PPP loan application and loan documents handy so you can make sure the info on your forgiveness application matches it exactly (legal name, DBA, address, NAICS code, EIN/SSN, loan number, number of employees at time of loan application).
  • Number of employees at time of loan application and forgiveness application are both simple head-counts, not FTEs or full- vs. part-time or anything else.
  • Covered Period is the date you received the funds through 24 weeks later, unless you determined a shorter period would be advantageous.
  • We recommend the “Amount of Loan Spent on Payroll Costs” total is not any higher than the minimum needed for forgiveness.
  • “Requested Loan Forgiveness Amount” should be the exact full total of your PPP Loan.
  • If you were unable to operate at full capacity, you may check the second box on the checklist, which means there is no requirement to fulfill the FTE (full-time equivalent) test.

Regarding backup documentation that you must submit with your application, keep in mind that what is considered acceptable support is up to each individual lender.
 – Payroll: your lender may ask you for bank account statements, payroll tax form 941s, and canceled checks for benefit invoices as proof of payment.
 – Nonpayroll: For rent/mortgage/utilities payments, your lender may ask for documentation that the obligation/services existed prior to 2/15/2020. They are likely to ask for proof of payment for all amounts claimed in this section.

If there is any concern that you might not have fulfilled the wage reduction or FTE tests, or that you do not meet a safe harbor or exemption for them, we strongly suggest working with a trusted advisor to prepare your PPP Forgiveness application, as it gets extremely complicated. Our approach, to be safe, has been to download the free Form 3508 PPP Forgiveness Calculator from the AICPA, regardless of which form you qualify to submit, so as to run all the numbers for the wage reduction test, and fill out the information to see if you are exempt from the FTE test or not. If you are not exempt, the AICPA also offers a free FTE calculator. We then suggest you retain these files as backup in case of audit, even if you end up passing all the tests and qualifying to submit a simpler form than the full 3508.

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