With the Paycheck Protection Program Flexibility Act signed into law June 5, 2020, the U.S. Small Business Administration (SBA), in consultation with Treasury, has released a revised PPP Loan Forgiveness Application and a new EZ PPP Loan Forgiveness application to assist borrowers seeking forgiveness.

The revised PPP Loan Forgiveness Application and instructions include, among other updates noted by the Journal of Accountancy:

• Health insurance costs for S corporation owners cannot be included when calculating payroll costs; however, retirement costs for S corporation owners are eligible costs.
• Safe harbors for excluding salary and hourly wage reductions and reductions in the number of employees (full-time equivalents) from loan forgiveness reductions can be applied as of the date the loan forgiveness application is submitted. Borrowers don’t have to wait until December 31, 2020, to apply for forgiveness to use the safe harbors.
• Borrowers that received loans before June 5 can choose between using the original eight-week covered period or the new 24-week covered period.

The new EZ PPP Loan Forgiveness application, which requires fewer calculations and less documentation than the full application, according to the Journal of Accountancy, can be used by borrowers that:

• Are self-employed and have no employees;
• Did not reduce the salaries or wages of their employees by more than 25% and did not reduce the number or hours of their employees; or
• Experienced reductions in business activity as a result of health directives related to COVID-19 and did not reduce the salaries or wages of their employees by more than 25%.

Owner Compensation Replacement Calculations

While the employee compensation limit for the 24-week period is three times the eight-week limit, the interim final rule does not do the same with the owner compensation replacement for businesses that file Schedule C, Profit or Loss From Business, or Schedule F, Profit or Loss From Farming, tax returns, according to the Journal of Accountancy. For those businesses, the maximum $15,385 during the eight-week covered period and up to $20,833 for the 24-week period.

With the PPP Flexibility Act going into law June 5, the SBA also issued a new interim final rule June 16, which reaffirms many of the changes to the PPP program previously reported.

Most notably, the interim final rule adjusts and adds to previous guidance for calculating loan forgiveness under the original eight-week covered period and establishes the 24-week maximum for payroll costs — including salary, wages and tips – for full loan forgiveness at $46,154 per individual.

NEED HELP?

Ericksen Krentel continues to monitor the ever-changing guidance and requirements for the PPP loan forgiveness process to ensure you receive the maximum benefits. Our team is ready to help create a customized approach for your organization to effectively, and correctly, use those funds to guarantee maximum forgiveness.

If you received PPP funds and need assistance in allocation and forgiveness documentation or calculation, please contact us by clicking here.

As questions or concerns arise, we ask that you contact us so we can address them as quickly as possible to ensure we continue to meet your needs. As a reminder, you can always monitor our COVID-19 Updates webpage by clicking here for the latest or monitoring our accounts on LinkedIn, Twitter or Facebook.

About Ericksen Krentel

Ericksen Krentel CPAs and Consultants, founded in New Orleans, Louisiana in 1960 with offices in New Orleans and Mandeville, believes that serving as the clients’ most trusted adviser is grounded in going beyond the numbers.

That includes helping clients achieve their business and personal financial goals by providing innovative and exceptional services in the following areas: audit and assurance services, tax compliance and planning, outsourced CFO services and business valuations for a variety of industries; employee benefit plan audits; fraud and forensic accounting; business planning; IT consulting; loss calculations; and estate planning.

Learn more at www.ericksenkrentel.com.

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