Answers to some of your most asked questions about PPP forgiveness applications.
When can I submit my forgiveness application?
Now. If you have used all of your issued funds you can start the process.
Do I qualify for the EZ forgiveness application?
To qualify for the EZ application you must be able to answer yes to the one of the three questions in EZ application instructions. Some major items to recognize in these questions:
- Question two talks about the average paid hours not changing. This means if an employee worked overtime or worked less than their standard hours in any week you would not be able to answer this question yet.
- Question three references not being able to maintain the same level of business activity due to government restrictions. However, at this time we do not have a definition of what business activity means (revenue, number of patrons, number of jobs, etc).
Should I submit my application now or should I wait?
Reasons to wait:
- Many payroll provider calculations are not yet accurate. So while these calculations can be done manually it may be better to wait until they have perfected them.
- The full time equivalent (FTE) employee safe harbor is on the date of the application or 12/31/2020. If you have not maintained your FTE you may want to wait until you restore your FTE count before applying.
- Waiting until your entire 24 weeks covered period has expired may increase your amount of forgiveness if you have an FTE reduction.
- Pending legislation – There is currently a proposed bill in Congress to auto forgive all loans under $150k and to change the criteria for loan forgiveness on other loans.
- Pending legislation – There is currently a proposed bill in Congress that would create a PPP round 2 for current PPP loan holders. We do not know how a forgiveness application would impact these.
Reasons to file now:
- You have maintained your FTE employee count or you have restored your FTE employee count but you are going to need to reduce it in the coming months. The safe harbor date on the FTE calculation is the date of your application or 12/31/2020 so picking your application date correctly could be very important to your forgiveness calculation.
- Once forgiveness is approved you can remove the loan from your financial statements. This may help you if you are looking to gain financing for other purposes.
Will loans under $150,000 be automatically forgiven?
Currently, there is proposed legislation that would allow for automatic forgiveness for loans under $150,000. However, the likelihood of this passing is unknown.
Written by Jacob Schroeder