Calculate how much you can forgive of your PPP Loan

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On October 9, 2020, the SBA released Form 3508S, instructions and an interim final rule providing simplification for PPP loans of $50,000 or less (except for borrowers that together with affiliates have loans totaling $2 million or greater). Qualifying borrowers who can use the Form 3508S are exempt from any reductions in the loan forgiveness amounts for both salary reductions and FTE reductions. 

The actual amount of loan forgiveness will depend, in part, on the total amount of payroll costs and other eligible costs paid during the covered period. There are reductions in the amount of forgiveness based on the percentage of eligible costs attributable to non-payroll costs, any decrease in FTEs and decreases in salaries/wages per employee. See PPP Loan Forgiveness Steps for additional information. 

The amount of advance received (up to $10,000) will reduce the forgiveness amount of the PPP. See Sec. 1110(e)(6) of the CARES Act. If a borrower receives an EIDL advance in excess of the amount of its PPP loan, they will not receive any forgiveness on the PPP loan. 

The covered period begins on the date the lender makes the first disbursement of the loan. Borrowers who received loans prior to June 5, 2020 can elect an 8-week covered period or a 24-week covered period. Borrowers who received loans June 5, or later will have a 24-week covered period. The loan forgiveness application provides for an alternative payroll covered period. Borrowers with a biweekly (or more frequent) payroll schedule may elect to calculate eligible payroll costs using the 24-week (or 8-week if elected) period that begins on the first day of their first pay period following their loan disbursement date.

No. The covered period is either the 24-week period beginning on the loan disbursement date or if the borrower received the loan before June 5, 2020, the 8-week period beginning on the loan disbursement date. Note that an alternative payroll covered period can be used for borrowers with a biweekly (or more frequent) payroll schedule. A borrower can apply for forgiveness before the end of the covered period (see question above). 

A borrower may submit a loan forgiveness application any time on or before the maturity date of the loan – including before the end of the covered period – if the borrower has used all of the loan proceeds for which the borrower is requesting forgiveness. Payments of principal and interest on the loan are not due until the lender determines the loan forgiveness amount. If a borrower does not submit the application for forgiveness within 10 months after the END of your covered period, payments on the loan will begin at that time. On Oct. 7, 2020, the SBA issued question No. 52 in their frequently asked questions reinforcing that the deferral period extension automatically applies to all loans, with no requirement from the SBA of a formal modification of the promissory note. 

Yes. A borrower may submit a Loan Forgiveness Application before the end of the 8-week or 24-week covered period, provided that the borrower has used all of the loan proceeds for which the borrower is requesting forgiveness and the borrower’s loan forgiveness application accounts for any salary reductions in excess of 25 percent for the full covered period. 

Borrowers are eligible for forgiveness for the payroll costs paid and incurred during the covered period or alternative payroll covered period. Payroll costs are considered paid on the day that paychecks are distributed or when an ACH credit transaction is originated. Payroll costs are considered incurred on the day that the employee’s pay is earned. Payroll costs incurred but not paid during the last pay period of the selected period are eligible for forgiveness if paid on or before the next regular payroll date. Payroll costs include all forms of cash compensation including tips, commissions, bonuses, and hazard pay. Payroll costs should be determined based on the Interim Final Rule.

Generally, employer contributions for employee retirement benefits that are paid or incurred during the covered period or the alternative payroll covered period are eligible expenses. Employee contributions (deducted from pay or otherwise paid by the employee) are not eligible costs. Contributions for retirement benefits accelerated from period outside the covered period or the alternative covered period are not eligible forgiveness expenses.

Borrowers with a biweekly or more frequent payroll cycle can include the entire pay period that is incurred within the covered period or the alternative payroll covered period as long as the payroll is paid on or before the next regular payroll date.

Borrowers with a bi-monthly or less frequent payroll cycle will need to calculate payroll costs for the partial pay period by determining the amount incurred and paid during the selected covered period. See Aug. 11, 2020 FAQ #3 - Loan Forgiveness Payroll Costs.

The amount of the loan forgiveness will depend on the amount spent during the covered period on:

1. Payroll costs as defined by the interim rule (does not include benefits for owners).
2. Owner compensation.
3. Interest payments on mortgage obligations for real/personal property paid or incurred before February 15, 2020
4. Rent paid or incurred on lease agreements in force before February 15, 2020
5. Utility paid or incurred under service agreements dated before February 15, 2020 

Cash compensation costs determined using the gross amount before deductions (subject to caps for owners), retirement contributions (paid or incurred during the covered period or alternative payroll covered period for employees subject to limits for owner-employees – see FAQ), health care benefits (see owner-employee limitations in FAQ), mortgage interest payments, rent, utility, interest payments on secured debt incurred prior to February 15, 2020, and/or refinancing an SBA EIDL loan made between January 31, 2020 and April 3, 2020. 

IRS Notice 2020-32 was issued on April 30, 2020 to state that no deduction is allowed for an expense that is otherwise deductible if the payment of the expense results in forgiveness of a PPP loan. The AICPA recently submitted a letter of support for legislation that would clarify that the receipt and forgiveness of Coronavirus assistance through the PPP does not affect the deductibility of ordinary business expenses.