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PPP Update: New FAQs Issued on Loan Forgiveness

8/5/20 – Emir Hodzic

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Yesterday, the Small Business Administration (SBA) issued another round of FAQs concerning forgiveness of Paycheck Protection Program (PPP) loans. The most recent FAQ can be found here.

The FAQ is broken down into four sections. The Journal of Accountancy provides a brief description of each section, which includes:

  1. General loan forgiveness: This section contains three FAQs. The first one clarifies that sole proprietors, independent contractors, and self-employed individuals who had no employees at the time of the PPP loan application and did not include any employee salaries in the computation of average monthly payroll in the Borrower Application Form automatically qualify to (and should) use the PPP Loan Forgiveness Application Form 3508EZ.
  2. Loan forgiveness payroll costs: This section contains eight FAQs. Question No. 8 addresses how to determine the amount of owner compensation that is eligible for loan forgiveness. The answer provides examples for owners of C and S corporations, self-employed Schedule C (or Schedule F) filers, general partners, and LLC owners. It also defines an owner-employee as someone who is both an owner and an employee of a C corporation. The term was referred to in the PPP loan forgiveness application but not previously defined. Also addressed are partial pay periods, group health care benefits, and two questions related to payroll costs that were incurred or paid outside of the eight-week or 24-week covered periods.
  3. Loan forgiveness nonpayroll costs: This section includes seven FAQs. No. 6 provides that payments of transportation utility fees assessed by state and local governments are eligible for loan forgiveness. Also addressed are two questions related to nonpayroll costs that were incurred or paid outside of the eight-week or 24-week covered periods and whether the Alternative Payroll Covered Period for payroll costs also applies to nonpayroll costs (it doesn’t).
  4. Loan forgiveness reductions: This section includes five FAQs. No. 4 explains how borrowers should calculate the reduction in their loan forgiveness amount arising from reductions in employee salary or hourly wage. Three examples of the salary/hourly wage reduction are included.

VonLehman experts are here to help. If you missed our recent article on calculating loan forgiveness to maximize your relief, you can find it here. We’ve also compiled a COVID-19 Resource Center to keep you up-to-date with breaking developments. Here, you can find resources to help you navigate these difficult times.

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