The Small Business Administration (SBA) has provided a simpler and more streamlined forgiveness application for Paycheck Protection Program (PPP) loans of $50,000 or less: Form 3508S. Qualifying borrowers are exempt from any reduction in forgiveness due to reductions in full-time equivalents and/or reductions in wages.

Although the EIDL application number and advance amount are requested on this form, the instructions do not address how it is taken into account for forgiveness.

This simplified application does not require a detailed computation of the forgiveness amount, but detailed support verifying payroll and nonpayroll expenses (i.e. business mortgage interest, business rental or lease, or business utilities payments) does need to be available for submission if requested. Payroll costs must be equal to at least 60 percent of the forgiveness amount. (Note: This information does need to be retained by the borrower for six years after the date the loan is forgiven or repaid in full.)

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The documents that must be submitted with this application are as follows.

Payroll

In order to verify eligible cash compensation and non-cash benefit payments for the requested period, the following documents are required:

  • Bank account statements or third-party payroll provider reports
  • Tax forms (Form 941 and state quarterly employee wage and unemployment insurance reporting filings) or equivalent third-party payroll provider reports
  • Payment receipts canceled check or account statements documenting the employer contributions to employee health insurance and retirement plans that were included in the forgiveness amount.

Nonpayroll

In order to verify the existence of obligations prior to February 15, 2020, and eligible payments for the covered period, the following documents are required:

  • For business mortgage interest payments, provide lender amortization schedule and canceled checks for the eligible payments
  • For business rent or lease payments, provide a copy of the current lease agreement and canceled checks for the payments
  • For business utility payments, provide copies of invoices and canceled checks or account statements

Even if the above type of expenses incurred exceeded the principal amount of the loan, the loan forgiveness can only be up to the principal amount of the loan. As a final note, Form 3508S cannot be used by a borrower, who together with their affiliates, received PPP loans totaling $2 million or more.

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Please contact your Hawkins Ash CPAs representative if you have questions.

Author: Judy Haven, CPA

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Jeff Dvorachek
I joined Hawkins Ash CPAs in 1998. I am the partner-in-charge of the Manitowoc, WI, office and tax director for the firm. I have thorough experience providing tax services to individuals, commercial businesses, nonprofit entities and estates and trusts. I also provide compilation and review services. I lead the Tax Committee and am a member of the Information Technology Advisory Committee.

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