Under $50,000 PPP Loan Forgiveness Simplified


October 9, 2020 - A new Interim Final Rule (IFR) issued October 8, 2020 offers additional guidance regarding recipients of the Paycheck Protection Program (PPP) loans with a de minimis forgiveness amount. The Treasury and the U.S. Small Business Administration (SBA) released PPP Loan Forgiveness Application Form 3508S. Recipients of PPP loans of $50,000 or less will now be able to apply for forgiveness using this simplified application (unless the borrower together with their affiliates received $2 million or more in PPP loans). This is important because over 68% of the PPP loans approved were for $50,000 or less.  It is paramount a borrower of a PPP loan under $50,000 have a discussion with their lender, as a lender may require their own equivalent form instead of preparing Form 3508S.

Under the IFR these borrowers are exempt from any reductions in forgiveness based on:

  • Reductions in full-time-equivalent (FTE) employees; and
  • Reductions in employee wages or salary.

The PPP loan forgiveness process for these borrowers becomes easier since they are not required to perform potentially complicated FTE or salary reduction computations. Some certifications and documentation will still need to be provided by these borrowers to the lender for payroll and non-payroll costs however. If applicable, the lender is required to confirm the borrower’s calculations on the loan forgiveness application (up to the amount of the requested forgiveness amount).

Once Form 3508S is submitted, the lender is required to confirm receipt of the borrower certifications contained in the form. Lenders are also required to confirm receipt of the borrower documentation submitted, to help in verifying payroll and non-payroll costs. According to the IFR, lenders are allowed to rely on borrower representations.  It is the borrowers’ job to provide accurate loan forgiveness computations. Within the application the borrower attests to the correctness of the reported information and loan forgiveness computations.

The IFR also issued guidance for PPP loans of all sizes on lender responsibilities in reviewing borrower documentation when eligible costs for forgiveness exceed a borrower’s PPP loan amount. The IFR states the amount of loan forgiveness that a borrower receives may not exceed the principal amount of the PPP loan.

Take a moment and rejoice in a win for this crazy year of 2020.  Any simplification procedures are always welcome.  Please feel free to contact your Dermody, Burke & Brown tax advisor to further discuss any questions you may have.


The information reflected in this article was current at the time of publication.  This information will not be modified or updated for any subsequent tax law changes, if any.

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