Your PPP 2 Loan Cover Period is most likely over by now. It is 24-weeks from when you received the initial deposit. The majority of our clients received this at the end of January through February. If so, your 24 weeks was over in July or August for reference. If it is over, you are able to start applying for forgiveness. Remember, you have until 10 months after your covered period is over to submit which means the majority of you have until May or June 2022 to apply for forgiveness; no sense of urgency.
Here are some steps on how to apply for forgiveness:
- The process is simplified this time around, especially for loans that are $150,000 or less. You are not required to submit workpapers but will need to keep them for at least 4 years in case of an audit.
- If you decide to submit the application yourself and were already on our list to help you with this, please let us know by Friday, October 1, 2021, that you plan to do it yourself.
- If you want our help, please also let us know by 10/1/21, if you have not already done so, and we will add you to our list. We plan to start this process the first week of October and will give you what you need to submit as soon as we can; this will occur during October and November. We estimate that our cost for preparing these applications will be between $1,500 and $2,500.
- The SBA has simplified this process and as a result, you may decide to submit this yourself. We encourage you to do this, if you feel comfortable, it is much easier. If you want to give it a shot, here are some steps to help you with this process:
- You will run a payroll report showing gross wages per employee for the covered period. For example, if you received the money on 1/28/21, your covered period will be 1/28/21 to 7/14/21 that you will run your payroll reports for.
- You will cap each owner at $20,833.00 and each employee at $46,154.00 gross wages for the 24-week time period.
- If you, as an owner, did not make at least $100K or more in wages in 2019, you will use the gross wages you were paid, divided by 12, and then multiplied by 2.5. Example – $80K Gross Wage / 12 X 2.5 = $16,667 you will cap yourself at instead.
- Take total Gross Wages of everyone for the 24-week period and subtract excess wages on any capped owner or employees, FFCRA wages paid, or any wages used for the ERC credit.
- Managers will let you know if you are eligible for ERC 2021, and it crosses over your PPP 2 period. Most of our clients have not been eligible for this credit but if you are, we recommend we help complete your PPP forgiveness application with the ERC calculation in order to make sure you max out the ERC credit as well as get full forgiveness on your PPP 2 loan.
- The total wages calculated in c. should be more than what you were given for the PPP 2 funds and if so, you will use this amount on the application. If not, you are able to add in the following payroll costs to this until you use all the funds:
- State Employer Tax Paid
- Health Insurance – use employee’s premium portion only and not owner’s portion. Remember this is the “employer cost” paid so you will need to factor in any portion the employee paid and use total premiums paid less this.
- Retirement Match paid during the covered period.
- If still not enough to zero out the PPP 2 money received, please contact us and we can help you with what to use to zero out the remaining funds received.
- Once you have the totals to use, you will fill out the forgiveness application. Typically, you will have an online portal with the bank you received the money from similar to what you did for PPP 1 and will select one of the following Forms:
- If your loan is $150K or less, you will use Form 3508S.
- If your loan is greater than $150K, you will use Form 3508EZ.
*Please note you may be required to use Form 3508 if your business was not mandated closed between 3/1/20 and the end of your covered period OR if you were not mandated closed, you reduced the number of employees or average hours paid between 1/1/20 through the end of your covered period.
The majority of our clients fall under the mandated closure requirement and can file Form 3508EZ due to closures you faced March through May 2020. If so, you will select #2 on page 2 of the Form 3508EZ application under “In addition, the Authorized Representative of the Borrower must certify at least One of the following two items”.
**If you are not sure, please contact us and we can confirm this for you if needed.
g. See the following link for the Application Form you will use including instructions for further detail. You will scroll down to “Forgiveness Forms and instructions” and select the Form you are required to fill out. It is pretty straight forward and typically the same form you filled out for PPP 1.
**If you are required to fill out Form 3508, you may want our help with this. It is a lot more complicated then Form 3508S and Form 3508EZ.
h. Please keep your final workpapers for at least 4 years in case of an audit. In this you will keep:
i. The payroll reports you used, and calculation done to come to the numbers you reported on the application.
ii. Back-up documents to support health insurance, state employer tax or retirement match used to include bank statements or cancelled checks to show it cleared.
iii. Quarterly payroll reports for both federal and state that ran during your covered period.
iv. A profit and Loss report showing you had at least a 25% reduction in revenue during a quarter in 2020 compared to 2019. This typically is quarter 2 (i.e., April to June 2020 compared to April to June 2019) for majority of our clients.
v. Please see instructions listed in the link above in g. or behind the application you select. This lists out the documentation you need to keep in more detail depending on what you use for your PPP 2 funds.
i. If your loan is over 150K, you will be asked to submit these workpapers to the bank.
We know you may be anxious to submit at this point. If you want this done sooner rather than later, please feel free to submit on your own. We are here to still answer any questions you have as you go through the process. We are also happy to review what you put together before you submit if needed. Otherwise, we will be in touch in the next couple months to give you what you need to submit.
Please remember to let us know by October 1st what your plans are if not already done or they changed. This will allow us to plan out our staff hours towards this over the coming months.