NEW PPP Guidance for the Self-Employed!
SBA Announces Full Forgiveness for Self-Employed Borrowers
As always, PPP stuff is ever-changing.
The SBA announces full forgiveness for SELF-EMPLOYED borrowers and releases the new PPP Loan Forgiveness application as well as the EZ Loan Forgiveness application. What do these new applications include that make life easier for borrowers? Let’s take a look…
Here's a Forbes article explaining the forgiveness rules for the SELF-EMPLOYED: https://www.forbes.com/sites/brianthompson1/2020/06/17/sba-finally-clarifies-ppp-loan-forgiveness-rules-full-forgiveness-for-self-employed-borrowers/#3f617b186741
That's key for the SELF-EMPLOYED, who previously with the 8-week time period were limited to 8/52 of their 2019 Schedule C Net Income; now with the new 24 week time period, they can use the original amount from their loan application of 2019 Schedule C Net Income / 12 x 2.5. That's lovely for the self-employed.
Now what we'd really like is future guidance on owner compensation for owner-employees (i.e. S-Corp owners), who are still officially limited to the 8/52, although this article makes the assumption that the 2.5 calculation should apply to S-corp owners, we'd really like it to be spelled out instead of an assumption.
New applications, Fewer Calculations, and Less Documentation Bring New Questions
The revised PPP Loan Forgiveness Application is out and is down to 5 pages from 11 pages. In the revised version, Page 1 with the Loan Forgiveness Calc is the same as before, but the Certification includes language about the 24-week Covered Period being used and that the 2.5 calc ($100,000 of 2019 compensation / 12 x 2.5) = $20,833 cap per individual and that if the 8-week Covered Period is used, then the 8/52 calculation cap applies.
Once again, this is where they specifically mention employee or SELF-EMPLOYED individual/general partner but NOT an S-corp shareholder.
The Newly released applications consisted of a revised full loan application and the EZ loan application. The new EZ loan application applied to:
- SELF-EMPLOYED borrowers with no employees; OR
- Did not reduce the salaries or wages of their employees by more than 25%, and did not reduce the number of hours of their employees; OR
- Experienced reductions in business activity as a result of health directives related to COVID-19, and did not reduce the salaries or wages of their employees by more than 25%.
Here is a link to the SBA summary of the Loan Forgiveness Application revisions as well as a link to download the instructions and applications themselves: https://content.sba.gov/sites/default/files/2020-06/PPP%20Loan%20Forgiveness%20Application%20%28Revised%206.16.2020%29.pdf
Here's one final link to a new summary from the Journal of Accountancy, which includes 2 additional links to both the revised Loan Forgiveness Application and the EZ Loan Forgiveness Application for SELF-EMPLOYED with no employees: https://www.journalofaccountancy.com/news/2020/jun/ppp-loan-forgiveness-applications.html
We will release all the updated information this week as it becomes public, so make sure you check back for updates!