In response to the Paycheck Protection Program Flexibility Act of 2020 (PPPFA), the U.S. Small Business Administration has revised its loan forgiveness application for PPP loans. This revision comes on the heels of public indignation over the difficulty of interpreting and completing the earlier loan forgiveness form.
The Revised Form
SBA Form 3508 has been reworked so that instructions are easier to understand and follow. The new form is identified with “06/20” in the bottom-left corner of the form, while the older form is marked with “05/20.” Small businesses using Form 3508 should make sure to use the newer form tagged with “06/20.”
An Even Easier Form
The SBA, in conjunction with the Treasury Department, has also rolled out Form 3508-EZ. This one is simpler than the revised regular form, with fewer lines to fill out and less documentation required. However, only certain businesses can use it.
Specifically, the SBA restricts the EZ form to businesses that:
- Had only one employee (self-employed individual, independent contractor, or sole proprietorship) at the time of loan application; OR
- Did not decrease the number of employees or average paid hours of employees and did not decrease annual salary or hourly wages of any employee by more than 25%; OR
- Had to reduce operations in response to health mandates during the coronavirus epidemic and did not decrease annual salary or hourly wages of any employe by more than 25%
To be eligible to use Form 3508-EZ, only one condition needs to be met.
Other Important Changes from the PPP Flexibility Act
Small businesses originally had 8 weeks to spend their loan proceeds in order to qualify for forgiveness. The Flexibility Act extends that to 24 weeks. Borrowers using either Form 3508 or 3508-EZ can elect to use the original 8-week period if they received loan proceeds prior to June 5, 2020.
The Act also lowers the amount of loan proceeds that must be spent on payroll costs to 60% from the original 75%.
For more information on the Flexibility Act and the important changes it has produced for PPP loan recipients, see our other article Key Provisions of the PPP Flexibility Act of 2020.
If you need further assistance navigating through the tax and legal environment of the coronavirus epidemic, contact a Glass Jacobson CPA today.
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