EZ PPP Loan Forgiveness Application
Posted Wed, June 17, 2020
The SBA alongside the Treasury Department released an EZ PPP Loan Forgiveness Application that is designed to streamline the loan forgiveness process for many small business owners. Not all, but most. As you are aware, the PPP Flex Act made a bunch of changes most notably extending 8 weeks to 24 weeks for the covered period, and also adjusting the payroll cost hurdle from 75% to 60% (ie, less has to ben spent on payroll costs to achieve maximum PPP loan forgiveness). The PPP Flex Act made 100% loan forgiveness more likely, and the EZ PPP loan forgiveness application made the process simpler… streamlined… or as the Treasury loves to say EZ.
While the Paycheck Protection Program has had its challenges, it also has been tweaked and modified along the way. We give a lot of credit to lawmakers who basically created this thing in hours, not days, and the SBA and Treasury for making it better. Not perfect, but certainly better.
Calculating Your Expenditures
On the EZ Loan Forgiveness Application Form 3508EZ, you still need to compute your four basic expenditures-
- Payroll Costs (salaries, wages, employer health care, employer retirement, SUTA or other state/local payroll taxes),
- Business Mortgage Interest Payments,
- Business Rent or Lease Payments (don’t forget the copier or business car on lease),
- Business Utility Payments (electricity, water, gas, internet, telephone).
This hasn’t changed since the beginning of the Paycheck Protection Program. Please refer to our other PPP loan forgiveness blog post on what goes into each of these expenditures since there are some devils in details.
In the same spirit of the “long” PPP loan forgiveness application, you need to compute three numbers-
- The total of the four basic expenditures above,
- The PPP loan amount,
- Payroll Costs from above divided by 0.60.
Of these three amounts, your loan forgiveness is the smaller of all three. Boom! Done! EZ PPP loan forgiveness application to the rescue. But there are rules… of course there are rules. It’s the government, and unlike the Sovereigns in season 6 of Bosch, you have to follow them.
Qualifying for the EZ PPP Loan Forgiveness Application
There are three different ways to qualify for using the EZ PPP loan forgiveness application.
1. Self-employed, independent contractor or sole proprietor who does not have employees nor included employee salaries on the original PPP loan application. Most likely you are a Schedule C filer since technically an S Corporation’s shareholder(s) are also employees.
2. Salaries or hourly wages were not reduced by more than 25% AND the number of employees or average paid hours were not reduced. The EZ PPP loan forgiveness application instructions spells this out with much more detail including dates and other considerations. But if you’ve been keeping up with all the hoopla, you probably know the particulars.
3. Salaries or hourly wages were not reduced by more than 25% AND business operations were reduced due to compliance with government compliance. Again, there are way more details in the instructions.
To use the EZ PPP loan forgiveness application, you must be able to satisfy one of the three situations above.
Documentation Not Required to be Submitted
The borrower (ie, business owners) using the EZ PPP loan forgiveness application must attest to one of the three situations above, and the SBA does not need to see your documentation. Cool! But you must keep the following documentation in case some suit wants to sniff around-
- Documentation supporting that annual salaries or hourly wages were not reduced by more than 25%, and
- Documentation regarding any employee job offers and refusals, refusals to accept restoration of reductions in hours, firings for cause, voluntary resignations, written requests by any employee for reductions in work schedule, and any inability to hire similarly qualified employees for unfilled positions on or before December 31, 2020, and
- Documentation supporting that the number of employees or the average paid hours were not reduced, and
- Documentation supporting reduced operations due to government compliance , and
- Documentation use to obtain the PPP loan.
Since the SBA put out the EZ PPP Loan Forgiveness Application, are you going to need help? Perhaps Yes… and perhaps No.
The Yes part comes from still needing to calculate payroll costs which can be tricky. Rent, utilities and business loan interest are straightforward… and might not even be necessary if you can already achieve 100% PPP loan forgiveness based on payroll costs alone.
The Yes part continues with any kind of full-time equivalent (FTE) and / or payroll reduction analysis. Sure, a business owner can simply attest to the fact that there has not been a reduction in FTEs or compensation… and then later backpedal with “thanks for bringing this to our attention” in response to a random audit.
The No part is based on being able to check one of those three boxes (see Qualifying for EZ PPP Loan Forgiveness above)… if you can do that, yeah, you probably don’t need our help beyond calculating payroll costs.
All up to you! We are not in the business of a quick money grab. We are not in the business of telling you something is crazy difficult when it truly isn’t. We are in the relationship business, and fortunately we have enough work in our office to keep us busy for a lifetime that we don’t need to manufacture unnecessary work.
Having said all that, if you wake up and just want someone else to handle it, we’ll jump in!
WCG Fees (should you want our help)
Our fees are generally based on complexity of your PPP world. If you qualify for the EZ PPP loan forgiveness but you still need us to compute payroll costs, rent, utilities and mortgage loan interest, our flat fee is $250. You will need to attest to the one of the EZ qualifiers above. If you need to use the “long” PPP loan forgiveness form or if you need us to verify that you qualify for the EZ PPP loan forgiveness application (FTE calcs, pay reduction calcs), then we have attempted to simplify the structure based on the number of employees which also includes the number of shareholders. Here are our fixed rates-
|21+ employees||Custom Quote|
If you are one of our business advisory service clients, the PPP loan calculation and the PPP loan forgiveness calculation is considered outside of scope. However, as part of our consultation arrangement we will provide questions to your answers should you want to put together your own calculation paperwork.
For those clients who have a tax-only engagement with us, our hourly rate is $250 per hour for PPP consultation.
PPP Loan Forgiveness Engagement
We have a separate engagement agreement for the PPP forgiveness component. Please visit the button below and download our PPP loan forgiveness checklist. If you have questions or concerns, please contact us at 719-387-9800 or [email protected].
Your PPP Task Force
Jason Watson, CPA is the Managing Partner of WCG Inc., a business consultation and tax preparation CPA firm located in Colorado Springs, and is the author of Taxpayer’s Comprehensive Guide on LLC’s and S Corps which is available online and from average retailers.
PPP Loan Forgiveness Consultation
Did you want to chat about how the PPP loan forgiveness works? See if you qualify for the EZ form? Let’s chat!