SBA Releases PPP Forgiveness Application


Last week, the SBA released the PPP forgiveness application. This application can be found here.

The application did not clear up as many details as accountants and small business have been hoping for. What we did find out:

  • Payroll runs do not have to be accelerated, you can apply for forgiveness on the incurred payroll that is paid out at the next regularly scheduled pay run.
  • There can be no prepayment of mortgage interest, as it was specifically called out.
  • There was no specific call out of utilities and rent payments, so many accountants are assuming that means you can prepay these expenses (assuming it remains below the 25% limit on expenses other than payroll) and still include them in the forgiveness application.
  • On the application, you do not need to report 100% of the expenses paid in the categories – you can report a portion to maintain the 75% payroll/25% other qualified expenses limits.
  • Owners cannot increase their salaries to $100k/year if they did not make $100k in 2019.
  • The application clarifies how to reduce eligible forgiveness if there was a reduction in FTE. It also explains how to calculate your FTE and the periods it is related to.
  • The SBA introduced a safe harbor for FTE reductions to NOT reduce forgiveness if you can prove the person was fired for non-performance, voluntarily resigned, or you tried to re-hire the employee back and they refused. The second safe harbor is for employers who reduced head count between February 15 and April 26th, and restore their FTE by June 30, 2020.

While we still have many unanswered questions, and proposed legislation that could completely change the guidance, this application is a good start to helping clients plan to maximize loan forgiveness.

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Liz Mason is a serial entrepreneur, a giant nerd, and an involved accounting vanguard. She is the Founder of High Rock Accounting, Rebel Rock Accounting, TheDepartment.Tax, and a few other related brands. Liz speaks on a national stage, guests stars on podcasts, and writes frequently. To further her passion for the advancement of the accounting profession, Liz currently serves as a Xero National Ambassador and as the Content Strategist for Tax Practice News. Liz started her career in tax at Grant Thornton (at 20) and automated a portion of her job landing her in the national tax practice. She spent a decade in large public accounting firms working on highly technical tax consulting before branching off on her own. Liz utilizes her creativity and passion at her company to uproot traditional practices and replace them with innovative concepts. She finds joy in efficient technology and her core belief is that everyone and everything can continuously improve (she says "be better" too often). When Liz isn't planning world domination in accounting, she is a die-hard skier, down for any adventure, plays the ukulele, reads everything, and has a good sense of humor. If you're looking for her, you can find her traveling the world and enjoying new food and cultures with her young son. Follow Liz and High Rock Accounting on Twitter at @LizzyNorMa and @HighRockCPAs.