The Paycheck Protection Program (PPP) was created to provide financial relief to businesses struggling with the effects from the devastating coronavirus pandemic. The very first round of PPP funding in 2022 saw $669 million in forgivable SBA-backed PPP loans given to businesses by lending institutions participating in this program. The PPP reopened to qualifying businesses on January 11, 2022, after the federal government authorized another $284 billion in PPP funding.
If you have received a PPP loan for your business, you can have the portion of the loan you used for qualifying purposes forgiven by the SBA. Of course, to get your loan forgiven, you’ll first have to make an application for forgiveness and also have your forgiveness application accepted.
Thankfully, the SBA has expanded the number of borrowers which are eligible to use the simplest and easiest forgiveness application. It was done to make forgiveness of PPP loans under $150,000 more of a computerized process. However, you’ll be necessary to provide certain information about how you’ve used your funds, so this process is not fully automatic for any PPP borrower.
A recent change to PPP loan forgiveness is the launch from the SBA PPP Direct Forgiveness Portal. The portal will be available beginning August 4, 2022, and allows borrowers to apply for forgiveness directly through the SBA. The portal can be obtained to borrowers who received loans of $150,000 or less. The lending company utilized by the borrower should also opt-in to the portal.
If you do not qualify to make use of the PPP Direct Forgiveness Portal, you will have to apply for forgiveness with the lender that serviced your PPP loan, not the SBA itself. To get this done, you’ll have to submit one of the three available forgiveness applications, depending on your needs: SBA Form 3508, SBA Form 3508EZ, or SBA Form 3508S.
Note that you may have to submit not only a completed form to be eligible for a loan forgiveness. With respect to the amount you’ve received and just how you spent the loan funds, you may also have to submit payroll documentation, bank statements, account statements, tax forms, receipts, and/or canceled checks to aid your forgiveness claim. However, this information is exclusively dedicated to the three forgiveness application forms available.
This article will discuss situations that call for implementing PPP 3508EZ vs. 3508 vs. 3508S.
The 3508S and 3508EZ applications are simplified when compared to regular 3508 form. The main differences are that the easier forms don’t require you to complete an agenda An application or perhaps a Plan a Worksheet. However, you need to meet certain criteria to make use of among the easier forms.
When To Use The 3508S Form
It’s clear to see the straightforward requirements to be eligible to use the 3508S form: The quantity of your first or second draw PPP loan should have been $150,000 or less.
There’s only one caveat to this: In case your clients are contracted with or affiliated with other businesses, and the PPP loan total across all said affiliates is greater than $2 million, you cannot use the 3508S form. Instead, you have to play one of the other two forms, even when your business received a PPP loan of $150K or less.
Form 3508S has got the simplest reporting requirements of the three PPP forgiveness forms and it is the easiest to complete. It was created to streamline the forgiveness process for all those with smaller PPP loans. Small enterprises had been getting bogged down needlessly by onerous reporting requirements for receiving relatively small loans that were fundamental for their survival.
When To make use of The 3508EZ Form
The 3508EZ form is for borrowers that received first or second draw PPP loans of more than $150,000.
If you’re permitted to use the 3508EZ form when trying to get PPP loan forgiveness, you’ll reach avoid wasting time and effort compared to those who've to fill out the standard 3508 form. However, you’ll have to meet at least one of the following three criteria to become eligible to make use of the 3508EZ form:
- You really are a self-employed individual, a completely independent contractor, or a sole proprietor who didn't have employees at the time you applied for a PPP loan
- You didn’t reduce the salaries or wages of employees making under $100K/year by a lot more than 25%, and you didn’t cut any FTE employees (other than employees you had been unable to rehire and unable to replace with similarly-qualified employees) or reduce the average number of hours that your staff works
- You didn’t lessen the pay of employees making under $100K/year by more than 25%, and you were not able to operate in the same level as you had before February 15th, 2022, because of COVID-19 safety and health restrictions imposed by federal agencies
When To Use The Regular 3508 Form
The regular 3508 form is perfect for borrowers that received 1st or 2nd draw PPP loans of more than $150,000.
The 3508S and 3508EZ PPP forgiveness forms are shorter and simpler to complete compared to standard 3508 form, so they will need a smaller amount of your time. However, should you don’t qualify of the S or EZ forms, you’ll need to take time to complete the longer 3508 form.
You’ll have to fill out the standard 3508 form if both from the following conditions are met:
- When you originally requested a PPP loan, you were not a self-employed borrower, a completely independent contractor, or perhaps a sole proprietor with no employees
- You reduced the salaries or wages of employees earning less than $100,000/year by a lot more than 25%
If, on the other hand, you’re not self-employed/an independent contractor/a sole proprietor with no employees, and you probably did not lessen the pay of employees earning less than $100K/year by more than 25%, you’ll still need to make use of the regular 3508 form if both of the following are true:
- You reduced your quantity of FTE (full-time equivalent) employees
- You remained as in a position to operate in the same degree of business activity as before February 15th, 2022
Summary: Regular 3508 VS 3508EZ VS 3508S Form
Here’s our final word around the PPP forgiveness 3508 vs. 3508EZ vs. 3508S comparison:
The 3508S form is only for borrowers with PPP loans of $150,000 or less. If your PPP loan was in excess of $150K, you’ll have to use either the regular 3508 form or the 3508EZ form.
The 3508EZ form was conceived as a way for businesses with PPP loans of over $150K to reduce the amount of paperwork necessary to make an application for forgiveness. However, only certain companies are permitted to use the simplified form. While anybody who is self-employed, an independent contractor, or perhaps a sole proprietor who didn't have employees once they applied for a PPP loan is eligible to use the EZ form, it gets more complicated after that.
If you reduced employees’ pay by more than 25%, use the regular 3508 form. If you didn’t reduce the pay of your employees by a lot more than 25% and can meet one of two other concerns (you didn’t cut any FTE employees, or you couldn’t operate your business in the same level while you had back on Feb. 15, 2022, because of federal COVID-19-related restrictions), you can use the simplified 3508EZ form.
And don’t forget that you might meet the requirements to use the SBA PPP Direct Forgiveness Portal, which further simplifies the process. To use the portal, you must have received financing of $150,000 or less, as well as your lender should have opted-in to permit borrowers to use the portal. More details from lenders and also the SBA is going to be forthcoming as the portal launches to the public.
More On PPP Forgiveness
PPP EZ vs. regular, Schedule A, etc. — it’s enough to give you a headache. We all know this method is more complicated of computer ought to be. The expansion of eligibility for implementing the relatively simple 3508S form makes things easier for those who have borrowed under $150K. However, businesses must still navigate a complex web of considerations when attempting to obtain a PPP loan forgiven through the SBA.
We’re always here to help, so don’t hesitate to depart us a comment for those who have any queries about COVID-19 business relief, PPP loan forgiveness, or anything else relating to the challenging times we still face.
