I’m going to show you a little bit about the New PPP Forgiveness Applications. There are now two of them. One an EZ version, one a full version, we’re going to talk about which one you should use, and then we’ll walk through them.
So to get started, we have the four documents that you need to download. I’ll include them in the email that you probably got when you’re looking at this.
PPP Loan Forgiveness Application Form 3508EZ
PPP Forgiveness Application 3508EZ ( Revised 06.16.2020)
PPP-Loan-Forgiveness-Application-Form-EZ-Instructions
PPP-Loan-Forgiveness-Application-Instructions_1_0.pdf
There is a forgiveness calculation form. You can consider this the full application. It’s only five pages, but it’s got some complexity to it. The 3508EZ, which is the quick and EZ form, just three pages, and then there are instructions for each one.
So let’s start with instructions for how to choose which form to use. If you fall under at least one of the three boxes below, at least one, you can do the EZ form, you do not submit the instructions with the form. It’s just, here’s how it works. So, Number 1, excuse me. If you are a self-employed individual, an independent contractor or sole proprietor who had no employees when you applied use Form EZ. If you did not reduce the annual salary or hourly wages of any employee by more than 25% during the coverage period or alternative covered period, compared to January 1 to March 31, 2020. So if you take January 1 to March 31, 2020, get your average pays, and then you can compare that to your covered period and we’ll talk about that in a minute. If it’s all the same, accepting those who made over 100,000, if they still make over 100,000 then this applies. And not only the average in terms of hourly wages and annual salary but also the number of employees and the average paid hours of employees between January 1, 2020, and the end of the covered period.
You can ignore reductions that arose from an inability to rehire individuals. So if you were going well through March 31, and then you dropped a bunch of people. Cool. And then you brought a bunch of people back and now we’re all back here at the end of the covered period, except for a few people who wouldn’t come back to work, that’s fine. You get to count them as coming back as long as you offered them the job formally and they declined or saved to have both of those. Or the borrow did not reduce the annual salary or hourly wages of any employee by more than 25% during the coverage period or alternative period compared to those between January 1 and March 31. And this is key. You didn’t cut anybody’s pay their wage or their salary, but you were unable to operate during the covered period at the same level of business as before February 15th, due to compliance with requirements established or guidance issued between March 1, 2020, and December 31 by HHS, Senator to CDC, those kinds of people. And it had to be specifically related to maintenance of standards of sanitation, social distancing, or other work. If you can check any one of these sets of three boxes, you are able to use the EZ form. If you wound up having salary reductions or the average number of employee reductions, you have to still use the longer form. Okay.
Now, at this time, most of this is the same instructions basically between the two forms. So I’m just going to use the EZ form instructions for now. Most of the information here is very straightforward. It’s your loan number, your name, how many employees you had at the time of the loan application it’s on your loan application, the number of times that you forgive at the forgiveness application whenever you have now, it’s all there.
These are the two sections that have changed significantly covered period vs alternative covered period. Let’s talk about the covered period first. The covered period now has two options. There it is. If you received your loan before June 5th, 2020, you may elect to use an 8-week covered period. So if you got this back in April, like many people, and you were working under the assumption that it’s an 8-week repayment period, fine, you can continue to do that. However, the new option is there is a 24-week period beginning on the PPP loan disbursement date. So if the bar is using a 24-week covered period and receive the proceeds on April 20th, then the first day of the covered period is April 20th and the last day of the covered period is Sunday, October 4th. In no event may the covered period extend beyond December 31, 2020. So, it won’t matter right now, but some people, later on, this year we’re going to have some trouble with that.
There is a slight alternative to that if you are bi-weekly or weekly, you can elect to start the covered period instead of the disbursement date. Okay. So you have the 8-week or the 24-week option. But instead, you would start the period that begins on the first day of the first pay period following their loan disbursement date. The pay period is not payday. It’s a pay period. It’s the days you’re paying people for, so on a bi-weekly, let’s say you run Monday through Sunday, Monday through Sunday, and then you pay the next Friday. If along the way you get your PPP loan, you’re going to be able to wait until the next pay period starts to start counting your 8 or 24 weeks. So, loan disbursement day, you can use that day or you can go to the first day of the first pay period that starts after that. Okay.
So, those are the key terms you need to know let’s go through the EZ application. So this is the 3508EZ, Name, DBA, Business Address, Primary Contact, Loan Number, Lender Number, Amount of Loan, the day you had a dispersed, Number of Employees you had at the time of the application, Number of employees you have now. If you got an EIDL, you have to put that in there but most of you didn’t. Payroll schedule, let’s say you’re a bi-weekly, you now put in the covered period, this is going to be either the 8 or 24-week period. If you’re twice a month or monthly starting on the day that you got the money. You got it on April 20th. It went into your bank on April 20th starts April 20th. Remember that if you got the dispersion on a Wednesday, for example, a week runs until the following Tuesday, not the following Wednesday. Okay. That would be a week and a day. So when you look at your calendar, you want to go from the next, you want to go from Wednesday to the next Tuesday, that’s one week and then count Tuesdays, all the way through 8 weeks or 24 weeks to get this date.
Your alternative covered payroll period, if that applies to you as a bi-weekly or weekly person, you can wait to start the period on the first day of the following pay period. You still have to put in the covered period, you have to put both of them in. If you receive more than 2 million checks those are the audit me later box. Okay. All right. Payroll costs. This is super easy. You put in the sum of your payroll costs that include your major medical, your employer contributions to benefits, your employer contributions to retirement, and your employer contributions to state taxes. Along with the gross pay of your employees, normally subtracting out any 1099 payments. So that all goes right here on payroll costs, mortgage interest, rent or lease and utilities, you just put them there. Add the lines together here on line five, and then on line six, put in your loan amount, okay? Line seven, it says payroll cost 60% requirement, divide line one by .6. Okay, so if this is 100,000, it’s not saying multiply by .6, divided by .6, it’s going to make a bigger number, it’s going to give you a total. So that’s a piece of it. Okay? So don’t worry if you look at that, and it feels a little weird. Whichever one of these five numbers is the smallest, that’s how much you get forgiven either the loan amount, the amount of all your expenses which could exceed that, or the payroll cost requirement will limit you one of those, but that number there, number eight, you’ve done all your maths. Pretty cool.
Then you have to go and sign all these things, you have to promise that these were used for eligible forgiveness payroll cost issues, the funds were not knowing for unauthorized purposes, you didn’t reduce salaries by wages more than 25%. This is one of those requirements to use the EZ form. That you verified those things, that you gave your lender copies of everything, that you’ve provided all the supporting documents, that they’re correct. You’re going to go to jail or get a major lawsuit, a civil penalty if you don’t. The tax documents you’re going to use to justify these are going to be the same as you submit to the IRS. The SBA can request additional information. And again, because this is the EZ form, you did not reduce the number of employees or the average paid hours of employees between January 1 and into the covered period, or you were unable to operate between February 15th and the end of the covered period at the same level of business activity is before February 15th due to compliance issues. Okay. Signature, print, date, title, give to your banker. Then there’s a question if you’d like to fill out think about the demographics on the bar. Okay.
That is the EZ form. The complicated form, called the Calculation Form, same info up top. If you notice this first page, exactly the same as the EZ form, same pieces here only you’re not having to certify certain things about 25% of you not reducing wages more than 25%, not laying off staff, because you’re using the complicated form if you did. If so, what you have to do is fill out the Schedule A, you’re first going to look at Schedule A here is salary or hourly wage reduction, we’re going to look to see if we’ve wound up reducing the average pay rate. Okay. Then we’re going to do a table two, which is going to look to determine if your average now the number of employees has gone down, the number of full-time equivalents. Then you’re going to look at non-cash compensation. These are the ones that the employee health insurance, the employee retirement plans, those go in there. And then you’re going to look at the compensation owners and put them all together.
The way they do that is they give you this worksheet, they have you do it by an employee, Employee Name, Employee ID, Cash Compensation, Average full-time equivalency, full time, or less. And if they had any sort of reduction, do all the math, come out there and do it, Now if you’re one of our clients in our People Processes system we have a data export called a PPP, data export PPP forgiveness, export, I believe. And in it, it will lay all of these out in this exact same rows so you can just pull it all in, does your thing. You set the dates of your covered period or your alternative covered period and it will do all your limiters like up to 100,000 and you will In compensation, and give you these totals.
The bottom line is that as you follow these instructions, it’s going to help you determine how much you’ve reduced by a percentage, the wages of your employees, or the hours of your employees or the number of your employees. Each one of those things is the things you’re going to go through. Once you have all that information down here, when you fill out the actual application, it’s going to wind up with this line seven. reduction, quote, potions, salary, hourly wage reductions, it will lower the amount you can be forgiven because you’ve lowered the amount you’re paying by more than 25%, which is part of the law. So that’s the two different forms. But this one is more complicated. You just have to follow the instructions. The main thing is getting the data. Again, if you’re one of our clients, we have it all for you. I’m sure if you’re with another payroll company, they probably can generate something that will give you that information. Okay, I’m going to put both of the instruction pages along with the EZ and the complex forgiveness application and you’ll probably be seeing this through email or link through social media. So we should have those linked on our site, in our COVID resources page.
I hope you found this helpful. I know it was a little long-winded but I tried to cover some detail but not too much. If you have any questions, please contact us at peopleprocesses.com. Reach out to us on social media. I’d love to help and I hope this video was helpful to you. Good luck with you and have a great day.
PPP Loan Forgiveness Application Form 3508EZ
PPP Forgiveness Application 3508EZ ( Revised 06.16.2020)
Today, we’re going to be diving into the interactions between Unemployment and the Paycheck Protection Program or the CARES Act. We’re going to talk a little bit more about that in just a second. But before we go too deep, please subscribe to our podcast. You can find us on iTunes, Google podcast, Spotify, Stitcher, pretty much any podcatcher of your choice. You can also subscribe at peopleprocesses.com which will give you access to subscriber-only content, lots of links on these pages, supporting documents, checklists and special discounts on things like our in-depth deep dive into the termination process, including 30 and 32 part lesson, state-specific information, all the forms you need. If you wind up going down the route of layoffs or terminations could be super helpful for you. For that, we have a 50% coupon code for subscribers to bring that price down a ton.
Now let’s dive in. The CARES Act has had far-reaching implications for our clients and listeners. I, personally, have tried to stay out of advising people on the CARES ACT loans. My company People Processes in the HR world and the Paycheck Protection Program, which is part of the CARES Act, are the BANK’s jobs to administer, and they’ve had a heck of time presenting even marginally standardized processes or advice over these first two weeks of the PPP.
But the dust is settled now, I’m not going to be going into the ins and outs of how the PPP to warrant loan works. If you don’t already know you’ve missed the boat. Funds ran out last week. So this is more about our decision making now for that 20 % or so of companies that have gotten a PPP loan. So our current question has been coming up.
I’ve been getting emails about, for those of you who have applied for the PPP, and actually gotten funds or at least an SBA guarantee, and you’re waiting on deposit, CONGRATULATIONS! I mean, you’re in a small minority of businesses and I really do think it can be very helpful to you.
However, it seems some of those people didn’t quite read the fine print on those loans. The PPP loans are forgivable, but ONLY if you :
>Spend 75% of the money in the eight weeks following the loan on the payroll.
>And you have to keep 75% of your headcount that you applied with on your loan, which is really last year’s average headcount 2019.
>And then you have to actually spend the other 25% on qualified expenses.
So if you get a pile of money from them and you don’t spend it over the next eight weeks on payroll, rent, mortgage interest, those sorts of things. You’re going to have a problem. Let’s say you have a business like a restaurant. A month ago you laid off the vast majority of your staff. Now you receive the PAYCHECK PROTECTION PROGRAM that’s what it’s called money. But you have no staff to pay, no work to do. How do you get the loan forgiven?
Well, the short answer is you don’t. I mean, I hate to say it, but the loan is forgivable only when you have payroll to support it. If you are a hair cutting salon and under a mandatory shelter in place order, having employees come in to cut hair is “not an essential service.” If you receive the funds this week, but your payroll is only 5% of what it was last year, well, you’re probably gonna have to pay this loan back rather than have it forgiven.
Your alternative is to “hire” your people back to say, “All right, well, look, we laid off all of you. Come on back.” Rather than have them claim unemployment. You can pay them to work from home, too. The haircutting salon, the restaurant, the residential floor company that asked us about what they do like floor refinishing, they can’t go into people’s houses right now. They originally did some major cuts, they CAN put people back on the payroll. Consider having daily or weekly happy hours or strategic meetings (over the web!), “Brainstorm – Plan – Execute” meetings that can make sure you are ready to roll when things come back online.
I know for a lot of small business owners, it’s hard to imagine paying your staff when there’s no work to be done, but that is what the PPP is for. It’s there so that companies who would otherwise not have the revenues to keep staff, WILL keep (or rehire them.)
There’s a fly in the ointment though:
There’s a problem that, well, let’s just call it the rule of unintended consequences. The increased subsidies to workers through the Federal Pandemic Unemployment Compensation (FPUC) was part of the CARES Act, it’s gonna make it harder to retain workers under the PPP: The FPUC provided an additional $600 per week across all sectors and income levels of the amount that these workers would be receiving from their state Unemployment Insurance programs. That means that for many lower-wage and even middle-wage workers, those roughly earning less than $44,000 a year in many states, they’ll make more on Unemployment than they would through their employment. And isn’t that a… Wow… Well, it’s what they did.
So the result will be more money in the pockets of the lower wage and even middle-wage workers. However, it will blunt retention under the PPP. We’re going to know over the next few months the extent to this trade-off.
But for those of you in the situation, that haircutting salon, your employees may be better off on it under unemployment rather than coming back to “work.” What about the situation? How are you going to fix it? Well, you have two options. I mean, on paper the option is you hire new people, but that’d be a heck of a thing, and probably not possible. If your old employees won’t come back to make less money to work rather than be unemployed, you’re not gonna find new people that you want to have. And again, you can’t get them to work. Or you don’t need the PPP.
If you got funds already, you applied under this saying, “Hey, we’re gonna use this to protect paychecks.” You can’t hire your people back because their unemployment pays better than you would. Well, it’s a loan now. Set that money aside, consider it a great low-interest loan to blow out your marketing when you reopen or provide a nice easy ramp so that you can bring your people back on. So that when you reopen, you can rehire, you got plenty of money set aside. For companies in this situation. You have to understand the PPP is there to be an ALTERNATIVE to unemployment. If your people are unemployed and the unemployment is really good, well, you got a nice loan, NOT a forgivable grant.
I know it’s hard and a lot of people kind of went into this thinking that this will be helpful. I reopen my restaurant, but it’s meant to be this temporary short term thing. And if you can’t spend it right now, well, it’s still a lot of help. You’re well-capitalized. Now, maybe you weren’t before. But now you have a great loan. And if you don’t want to use it, that’s okay. You can just give it back to the bank and boom, you paid off your loan. So it didn’t hurt you at all. You didn’t have to pay an application fee, you didn’t pay any points on it. So if you just decide this isn’t for you, that’s okay. But most of you, you want that money in the bank and the 1-4% interest rate that you’re going to pay on it is cheaper than you would get on anything else. So when it’s time to reopen, awesome, you’re in great shape to do so.
Ladies and Gentlemen, my name is Rhamy Alejeal, I’m the CEO of People Processes. And we help companies with software, administrative services, and HR consulting all across the people processes world. That’s from onboarding to retirement and really recruiting to retirement. We can handle payroll benefits. We have been so overwhelmingly busy these last few weeks because of the CARES Act and the FCRA. But it’s been amazing to see how our clients have reacted and been able to keep people on some have had to do layoffs. Some have had to just heroic measures to keep these businesses up and running. And I’m so excited to see over the next few weeks or months as the country reopens the explosion of growth that’s going to come from our clients and other businesses like them across the United States. You can reach us at service at peopleprocesses.com, go to peopleprocesses.com and subscribe. I’d love to see you there. Join our community so that we can grow together, learn together, and have a great day and get your work done. Thanks For listening.
Copyright © 2024, Poplar Insurance Agency, Inc., d/b/a People Processes. All rights reserved. Privacy Policy
