June 17, 2020 - The Department of the Treasury and the SBA just released a News Release along with a revised PPP application for loan forgiveness. A new EZ application was also released if you meet certain requirements for filing it. Click here to access this information.
The requirements to be able to file the new EZ form are one of the following:
A self-employed individual with no employees
Salaries were not reduced by more than 25% and the number of hours employees worked was not reduced
Reduction in business activity was due to COVID-19 health directives and salaries were not reduced by more than 25%
The new EZ application is a 2-page simplified form that requires considerably less information.
The original application has been revised for the following changes:
payroll costs must now be 60% of the loan forgiveness as opposed to 75%
payroll costs can now be paid or incurred as opposed to having been paid and incurred
there is an FTE Reduction Safe Harbor that is an exception for a business activity decrease due to COVID-19 health directivesAs previously mentioned, the 8-week period for expenses to be forgiven has been increased to a 24-week period. The 24-week period automatically applies to all loans. For loans received prior to June 5, 2020, there is still the option of using the 8-week period. To elect to still use the 8-week period, just submit your application for loan forgiveness after the 8-week period.
If using the 24-week period, the application for loan forgiveness needs to be filed after the 24-week period ends. As a result, for the 24-week period, the FTE safe harbor for rehiring employees has been extended from June 30, 2020 to the earlier date of December 31, 2020 or the date the application for loan forgiveness is submitted.
Also, if using the 24-week period, an owner-employee or self-employed individual/general partner may not receive more than 2.5 months’ worth of the individual’s 2019 compensation, capped at $20,833, as compared to the 8-weeks’ worth of compensation capped at $15,385.
The 24-week period would usually be better to use since it will give the business more time to pay expenses eligible for forgiveness. The only reasons not to use the 24-week period are if the business would not be able to meet any of the FTE safe harbors, and payroll is expected to continually decrease for the rest of the year from where it was previously as opposed to increasing, or if it is important to have the loan removed from the balance sheet as soon as possible.
The application for loan forgiveness must be filed within 10 months of the end of the 8-week or 24-week covered period. If it is not filed by then, the PPP loan is no longer deferred and the borrower must begin paying principal and interest.
To read full press release, click image above or click here.
Your professionals at Castellano Korenberg & Co. are always available to assist you through this tough time of trying to make sense of all the new regulations being passed. Stay up to date with the most recent information by visiting castellanokorenberg.com, call us at 516-937-9500, or contact your CK professional for more information.