New PPP FAQs and Forgiveness Tool

Posted August 2020

The Treasury and Small Business Administration (SBA) released guidance on August 4, 2020, answering 23 frequently asked questions regarding the forgiveness of Paycheck Protection Program (PPP) loans. The 10-page FAQs covers the calculations and process to determine how much of a PPP loan is forgivable. The key topics are (1) General loan forgiveness, (2) Payroll costs, (3) Nonpayroll costs, and (4) Forgiveness reductions.

If you are completing SBA Form 3508, PPP Loan Forgiveness Calculation Form, or Form 3508EZ the American Institute of CPAs (AICPA) has developed a free tool designed to help borrowers at The tool allows data to be imported to produce all government-required forms. PPP applicants will be able to electronically sign forms and documents will be saved into a downloadable file that can be provided to PPP lenders. A video is available providing a brief overview of the tool. The PPP loan forgiveness tool will be updated as needed to reflect any new changes.

FAQ Summary Highlights

General Loan Forgiveness 

  1. Sole proprietors, independent contractors, and self-employed individuals who had no employees will automatically qualify to use Form 3508EZ.
  2. Scanned documents and electronic signatures are allowed for the forgiveness application.
  3. Loan and interest payment requirements during the loan forgiveness process are explained.

Loan Forgiveness Payroll Costs 

  1. Payroll costs incurred during the Covered (or Alternative Payroll Covered) Period and paid on or before the next regular payroll date are eligible for loan forgiveness.
  2. Payroll costs incurred before the Covered Period and paid during the Covered Period are eligible for loan forgiveness.
  3. Payroll costs for partial pay periods are explained.
  4. Gross amounts should be used when calculating cash compensation.
  5. Qualified payroll costs include tips, commissions, bonuses and hazard pay, within the $100,000 annualized limit.
  6. Payroll costs include health care benefits that are paid or incurred by the borrower during the Covered (or Alternative Payroll Covered) Period.
  7. For non-owners, retirement benefits paid or incurred during the Covered (or Alternative Payroll Covered) Period qualify as payroll costs.
  8. For owner compensation that is eligible for loan forgiveness, examples and caps are provided.

Loan Forgiveness Nonpayroll Costs

  1. Eligible mortgage interest, rent, and utility costs incurred prior to the Covered Period and paid during the Covered Period are eligible for forgiveness.
  2. Nonpayroll costs are eligible for loan forgiveness if they were incurred during the Covered Period and paid on or before the next regular billing date.
  3. The Alternative Payroll Covered Period does not apply to nonpayroll costs.
  4. Payments of interest on business mortgages on real or personal property (such as an auto loan) are eligible for loan forgiveness. Interest on unsecured credit is not eligible for loan forgiveness.
  5. Rules for renewed leases and refinanced mortgage loans are explained.
  6. Eligible transportation fees mentioned in the CARES Act are defined as transportation utility fees assessed by state and local governments.
  7. Entire electricity bill payments are eligible for loan forgiveness, including fees.

 Loan Forgiveness Reductions 

  1. Calculation of full-time equivalent (FTE) reductions when employees will not return to work or qualified employees cannot be hired is explained.
  2. Reduction for seasonal employers is explained.
  3. The calculation of FTE Reduction Exceptions apply to all employees, including those who earned over $100,000 annualized.
  4. Calculation of reduction in loan forgiveness amount arising from 25% reductions in employee salary or hourly wage is explained with examples.
  5. The 25% reduction calculations include only decreases in salaries or wages and do not include other forms of compensation.

Questions regarding how FTE reductions work if applying for forgiveness before the end of the covered period were not answered, but more guidance is expected.  For more information or if you have questions, please contact us.