If you received a Paycheck Protection Program loan for less than $150,000, your forgiveness process just got easier. On January 19, 2021, the Small Business Administration (SBA) released an updated PPP Loan Forgiveness Application Form 3508S which requires fewer calculations and less documentation from borrowers.
There are three forms that borrowers can use when applying for forgiveness.
Both Form 3508 and Form 3508EZ require multiple calculations and various supporting documents to show the forgiveness amount you've requested.
Alternatively, Form 3508S simply asks you to:
This makes Form 3508S the simplest forgiveness application form.
While your application is being reviewed, both your lender and the SBA can request supporting documentation for accuracy. Penalties for knowingly making a false statement to obtain forgiveness include up to 30 years imprisonment and fines of up to $1 million.
If your PPP loan amount was less than $150,000, you can use the forgiveness Form 3508S. However, you are ineligible to use Form 3508S if your business has a contract or agreement of affiliation with other businesses and the PPP loan total across all affiliates is greater than $2 million.
Any business type can use Form 3508S, from contractors to corporations.
When filling out this new application form, there are seven total representations and certifications the borrower must verify:
You do not need to submit any documentation when applying for forgiveness using form 3508S. However, the SBA can request any of the following to verify your approved forgiveness amount:
If you are a sole proprietor, contractor, or self-employed, you are eligible to take owner compensation replacement (OCR). If you are taking OCR, you will have to provide your 2019 or 2020 Schedule C. This is because your forgiveness amount is based on the 2019 or 2020 Schedule C. You can calculate your OCR by taking 8/52 or 24/52 (depending on your covered period length) of your net income reported on line 31 of your Schedule C.
All records relating to the borrower's PPP loan must be kept for at least six years after the loan is either forgiven or paid off. That means holding onto any payroll reports, non-payroll cost receipts, and tax documents that you used to apply for forgiveness and apply for a PPP loan.
By submitting a forgiveness application, you are permitting the SBA to request any of these documents at any time during those six years.
Check out our list of PPP lenders taking forgiveness applications right now.
No need to rush! The SBA has not set a deadline to apply for forgiveness. You have 10 months after the end of your covered period before you are required to start paying back your loan with monthly payments.
Lenders have been reaching out in waves to PPP loan recipients. Keep your eyes peeled on your inbox and visit any PPP resources they have available for an update on when they will be ready to accept your forgiveness application.
The lender has 60 days to review your forgiveness application—regardless of what form was used to apply. Your lender may decide to forgive all, some, or none of the PPP loan amount. From there, your application is sent to the SBA for a final review and confirmation of your forgiveness amount. The SBA has up to 90 days to evaluate your application and may contact you directly for additional information. Once this is done, your lender will let you know the final result of your application.
If your loan is partially forgiven—or not forgiven at all—interest will start accruing and payments must start being made 10 months after the end of your covered period.
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