PPP Loan Forgiveness: Rules, Application, & Facts

ppp loan forgiveness rules

For purposes of this calculation, borrowers must divide the average number of hours paid for each employee per week by 40, capping this quotient at 1.0. For example, an employee who was paid 48 hours per week during the covered period https://accounting-services.net/bookkeeping-101-everything-you-need-to-know/ would be considered to be an FTE employee of 1.0. This restriction applies only if the crewmember is performing services described in section 3121(b)(20) of the Internal Revenue Code for the particular fishing boat owner.

ppp loan forgiveness rules

If the PPP lender has already submitted a forgiveness decision to SBA, the lender shall promptly transmit the SBA Form 3508D to SBA. Otherwise, the PPP lender shall transmit the SBA Form 3508D to SBA at the time the lender issues its forgiveness decision to SBA. The PPP lender shall transmit the SBA Form 3508D to SBA with the PPP lender’s forgiveness decision. Alternatively, the PPP lender may transmit the completed Form 3508D to SBA when received.

Paycheck Protection Program loan forgiveness

Thanks to a simplified forgiveness application for smaller loans, those with loans of $150,000 or less won’t submit all these documents. However, you’re still required to retain employment records for four years and other related documents for three years. PPP allows for full forgiveness when at least 60% of the PPP funds go toward eligible payroll costs (it had previously been 75%). You need to account for where and when you spent each dollar in the forgiveness application. The December COVID-19 relief package allows PPP borrowers to choose to have their loan period cover eight or 24 weeks. Borrowers may select only one of these two methods, and must apply that method consistently to all of their part-time employees for the covered period and the selected reference period.

  • In either case, the borrower shall provide the aggregate total of FTE employees for both the selected reference period and the covered period by adding together all of the employee-level FTE employee calculations.
  • The longest of the forms, borrowers will have to fill out the form’s attached PPP Schedule A. The Schedule A includes tables detailing your FTE and any salary/wage reductions in the covered period.
  • FTE documentation showing the number of FTE employees for the FTE reduction reference period selected.
  • We recommend that you speak with your accountant, business advisor, or seek assistance from a local Small Business Development Center.
  • You can still receive some forgiveness if you don’t follow this rule, but the amount will reduce in proportion to the percentage you did spend on payroll.
  • This restriction applies only if the crewmember is performing services described in section 3121(b)(20) of the Internal Revenue Code for the particular fishing boat owner.

You are entitled to use the PPP loan to replace lost compensation due to the impacts of COVID-19. You are eligible to claim 2.5 months’ worth of your 2019 or 2020 net income to replace pay. Loans received after March 3, 2021 can use their 2019 or 2020 gross income if they used their gross income to apply.

Get help with your PPP loan

Payments other than for cash compensation should be included on lines 6 through 8 of PPP Schedule A of the loan forgiveness application and do not count toward the $20,833 cap per individual. Providing an accurate calculation of the loan forgiveness amount is the responsibility of the borrower, and the borrower attests to the accuracy of its reported information and calculations on the Loan Forgiveness Application Form. Lenders are expected to perform Start Printed Page 8296a good-faith review, in a reasonable time, of the borrower’s calculations and supporting documents concerning amounts eligible for loan forgiveness. For example, minimal review of calculations based on a payroll report by a recognized third-party payroll processor would be reasonable. By contrast, if payroll costs are not documented with such recognized sources, more extensive review of calculations and data would be appropriate. The borrower shall not receive forgiveness without submitting all required documentation to the lender.

A shorter forgiveness application is on the way for most PPP loans. If you received a PPP loan for $150,000 or less, wait until your lender and the SBA are ready to accept your application. You’ll be notified of the loan forgiveness amount as your case moves to the SBA. If you don’t like the answer — maybe you Difference Between Bookkeeping and Accounting Examples only got partial forgiveness when you expected 100% — you have 30 days from receiving your lender’s decision to request the SBA review your case again. You have 10 months from the end of the loan period to apply for forgiveness. If you wait too long, loan payments will start coming due at a 1% interest rate.

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