Finances and Taxes

Here’s How to Fill Out the PPP Loan Forgiveness Application—Your Step-by-Step Guide

Andi Smiles Small business financial consultant 
PPP Loan Forgiveness Application_ Walkthrough and Calculations - Gusto

Update as of July 7: This article has been updated with the latest guidance and application forms from the Small Business Administration (SBA).

Three months after the launch of the Paycheck Protection Program (PPP), many business owners are looking towards their PPP loan forgiveness applications. The Small Business Administration (SBA) recently released a new loan forgiveness application, along with a simplified EZ application. Though the SBA continues to issue updated guidance, we finally have (most of) the information we need to move towards the forgiveness phase.

To keep it real, the PPP loan forgiveness application looks deceptively simple—but the SBA packed a lot of math punch into the application. That means you need to take your time and be thorough with your calculations.

If you’re a Gusto customer, our forgiveness report makes these calculations super simple. We’ve also created a handy spreadsheet to help keep track of your calculations:

PPP Loan Forgiveness Calculation Spreadsheet

If you’re feeling the impulse to run, don’t worry. We’re going to walk you through the PPP loan forgiveness application one step at a time. But before we begin, let’s talk about what’s new with PPP loan guidelines.

New guidance

With the release of the new PPP loan forgiveness applications and the passage of the PPP Flexibility Act, the SBA continues to include new guidance on how loan forgiveness works and on PPP loans in general. Here’s what’s new:

Extension of the forgiveness period: Originally the forgiveness window was eight weeks, but under the PPP Flexibility Act, the forgiveness window is extended to 24 weeks (168 days). If you received your PPP loan prior to June 5, 2020, you can still choose to use the eight-week forgiveness window.

EZ Loan Forgiveness Application: The simplified two page loan application makes applying for loan forgiveness easier. To be eligible to use the EZ application you must meet certain requirements (we’ll go over those next). 

Owner compensation: The 24-week forgiveness period has increased the maximum owners can pay themselves. Owners can now pay themselves:

  • 8-week covered period: Eight weeks of 2019 net profit, which cannot exceed $15,385.
  • 24-week covered period: Two and a half months of 2019 net profit, which cannot exceed $20,833.

Anything paid over this amount needs to come from non-PPP funds.

Keep in mind that the maximums only apply to gross wages. Money paid to the owner’s health insurance and retirement plan contributions isn’t included.

Employee compensation: The maximum allowable employee compensation has also changed. Now, employees can be paid a maximum of either:

  • 8-week covered period: Up to $15,385
  • 24-week cover period: Up to $46,154

Unlike owner’s compensation, these maximums include covered benefits, like health care and retirement. 

Rehiring employees: Originally, if you couldn’t maintain your employee headcount during the covered period, part of your loan would not be forgiven. While this is still true, the SBA has released more safe harbors to make it easier for businesses to qualify for full loan forgiveness.

You can have your PPP loans forgiven if:

  • You did not reduce the number of employees or average paid hours from January 1, 2020 through the end of the covered period. 
  • You were unable to restore business activity to pre-February 15, 2020 operational levels by the end of the covered period. 
  • You have restored your employee headcount to the same headcount in the pay period that includes February 15, 2020 by December 31, 2020. 

Alternative Payroll Covered Period: Initially, the covered period—aka the window borrowers have to spend their PPP loans in order for those funds to be eligible for forgiveness—started on the date of your first loan disbursement. Now, you have the option to use either that standard covered period or the Alternative Payroll Covered Period. The Alternative Payroll Covered Period starts on the first day of the first pay period after your first loan disbursement. 

For example, say you run payroll weekly on Friday and receive your PPP loan on May 12 (which is a Tuesday). Your next pay date is May 15 for the period of May 9 through May 15. If you use the Alternative Payroll Covered Period, then you can have your start date begin on May 16 instead of May 12. 

Note that only businesses with bi-weekly, semi-monthly, or more frequent pay schedules can opt in to this Alternative Payroll Covered Period.

Incurred payrolls: Originally, we thought you had to run payroll during the covered period, but payroll costs incurred during those eight or 24 weeks also count towards loan forgiveness. Incurred payroll applies when the forgiveness window ends in the middle of a pay cycle. 

For example, if your covered period ends on June 15, but your pay period is from June 13 through June 19, then the payroll costs from June 13 through June 15 are eligible for loan forgiveness, even if you run payroll after the forgiveness window ends. Just make sure you run that regularly scheduled payroll after the covered period.

Additional FTE reduction exceptions: There are four exceptions to the full-time equivalent (FTE) reduction requirement. Employees won’t count against your FTE averages if they:

  • Refuse to come to work: You make a good faith effort to rehire an employee at the same wage and hours as previously, and they refuse the offer.
  • Are terminated for cause: You fire an employee for legal reasons (like theft).
  • Voluntarily resigned: The employee voluntarily resigns. 
  • Voluntarily reduce their hours: The employee requests a reduction of hours.

Keep in mind that you’ll need documentation if you claim one of these exceptions on your PPP loan forgiveness application. 

Wage reduction clarification: Initially, many people interpreted the 25% wage reduction cap as a percentage of the total amount of wages paid in the first quarter of 2020. But, under the new SBA guidance, it’s actually based on the average wage paid to the employee. For example, $40,000 per year for a salaried person or $20.00 per hour for an hourly person.

Regardless of if the employee is salaried or hourly, you cannot reduce their wage by more than 25%. If your employee’s wage changes week to week, you’ll need to calculate their average wage over the 24-week forgiveness period. This average wage must be at least 75% of their average wage during the first quarter of 2020 (January 1, 2020 to March 31, 2020). 

FTE baseline period: Under the new SBA guidance, the FTE reference periods are:

  • February 15, 2019 to June 30, 2019
  • January 1, 2020 to February 29, 2020 
  • Seasonal employers can choose from:
    • February 15, 2019 to June 30, 2019
    • January 1, 2020 to February 29, 2020 
    • Any 12 weeks from May 1, 2019 to September 15, 2019

FTE calculation: The SBA has added guidance on two methods for calculating your average FTEs during the reference period and the forgiveness window. We’ll go through a thorough explanation of the FTE calculations in the application walkthrough.

What you need to apply

Make sure you have the following information handy when you’re ready to prep your forgiveness application:

  • Your PPP loan amount and disbursement date
  • Payroll history for the 24-week forgiveness period (you’ll need to know each employee’s total pay and average wage)
  • Payroll history for the first quarter of 2020
  • Average FTE of each employee during the forgiveness period
  • Average FTE of each employee during your reference period
  • Total amount paid for employee health insurance, retirement plans, and state and local taxes on employee compensation
  • Total amount paid to owner-employees, self-employed individuals, or general partners
  • Total amount paid for business mortgage interest payments, rent or lease payments, and utility payments

Which application should you fill out?

There are now two loan forgiveness applications. The EZ application is much simpler, but you must meet one the following requirements to be eligible to use it:

  • You’re self-employed or an independent contractor
  • You’re a sole proprietor with no employees 
  • You’re an employer who didn’t reduce salary or wages for any employee by more than 25% during the covered period. If you qualify under this requirement, you also must meet one of these requirements:
    • You didn’t reduce the number of employees or average paid hours of employees from January 1, 2020 through the end of the covered period. 
    • You were unable to maintain the same level of business activity as prior to February 15, 2020 during the covered period. 

If you do not meet at least one of these requirements, then you’ll need to complete the regular PPP application. If you are eligible for the EZ application, then you can skip to the EZ application walkthrough

PPP loan forgiveness application breakdown

There are four parts to the regular PPP loan forgiveness application:

  • Schedule A Worksheet
  • Schedule A
  • Loan Forgiveness Calculation Form
  • Borrower Certifications

When you first open the application, you’ll notice that the first page is the Loan Forgiveness Calculation Form. You’ll intuitively want to start here (it is first, after all). Still, the application will be easier to complete if you start with the Schedule A Worksheet, move on to the Schedule A, and then complete the calculation form (which pulls information from the worksheet and Schedule A). 

Thankfully, the SBA has now released a separate document with instructions. I recommend you keep the application and instructions both open as you complete the application. 

Not gonna lie—the application process can be kinda… a lot. But we’re going to go step by step through the application together. All right, deep breath friends. Let’s do this. 

PPP Schedule A Worksheet

You have two options when it comes to the Schedule A worksheet:

  • Complete the worksheet in the application
  • Obtain an equivalent report from your payroll processor

If you have more than three employees, unless you can get a report from your payroll processor, I recommend replicating the tables in the Schedule A worksheet in a spreadsheet and starting there. You can then transpose the information into the application or ask your lender if you can attach your spreadsheet instead of the provided table. 

Table 1

You will only include employees in Table 1 if they were:

  • US-based employees 
  • Employed during the Covered Period or Alternative Payroll Covered Period
  • Earned less than an annualized rate of $100,000 for all pay periods in 2019 OR were not employed by you in 2019
Schedule A Worksheet_1

Employee’s Name: List each employee. Do not include independent contractors, self-employed persons, partners, or owner-employees. 

Employee Identifier: Put the last four digits of each employee’s Social Security Number. 

Cash Compensation: This is the total you paid the employee during the Covered Period or Alternative Payroll Covered Period. This total includes the employee’s gross:

Average FTE: Enter the employee’s average FTE during the Covered Period or Alternative Payroll Covered Period. There are two ways to calculate this. 

  1. Simplified Method: Assign 1.0 FTE if the employee worked 40 hours a week (or more). For employees who worked less than 40 hours per week, assign them 0.5 FTE. 
  2. Other Method: Take the employee’s average number of hours worked per week and divide that number by 40. Then round to the nearest tenth. 

Here’s an example of how each method works. Your employee works an average of 30 hours per week. Using the simplified method, you would assign this employee 0.5 FTE. 

The other method looks like this:

30 / 40 = 0.75

0.75 = 0.8 (rounded to the nearest tenth)

No individual employee can be more than 1.0 FTE. So, even if your employee works 45 hours per week, their FTE is still capped at 1.0. 

Salary/Hourly Wage Reduction: Here, you’ll put the total dollar amount that you reduced the employee’s salary over the 25% threshold. Before you can fill out this section of the table, you’ll need to do some math. Page 4 of the instructions includes guidance on calculating the salary or wage reduction, which we’ll walk you through.

If you reduced salary or wages at all, you’ll want to walk through these calculations to figure out if it was more than 25%—although you only need to enter percentages if your reductions exceeded 25%. If you didn’t reduce the employee’s salary or hourly wage, you’d put zero.

Before getting started, make sure that you read through the New guidance section of this article and the Wage reduction clarification subsection. 

Step 1. Determine if pay was reduced more than 25%.

Wage Reduction_1

A. Enter the employee’s average salary or hourly wage during the forgiveness period. This is not the total amount you paid them but their actual wage rate. 

B. Enter the average salary or hourly wage between January 1, 2020 and March 31, 2020 (the first quarter of the year). 

C. Divide the number in A by the number in B. If the total is 0.75 or more, enter zero in the salary/hourly wage reduction column. If not, you’ll proceed to Step 2. 

Example (salaried worker):

A. You paid your employee an average salary of $40,000 during the forgiveness period. 

B. In the first quarter of 2020 you paid your employee an average salary of $55,000. 

C. $40,000 / $55,000 = 0.73. You need to proceed to Step 2.

Example (hourly worker): 

A. You paid your employee an average hourly wage of $18 during the forgiveness period. 

B. In the first quarter of 2020 you paid your employee an average hourly wage of $20. 

C. $18 / $20 = 0.9. You didn’t reduce your employee’s wage by more than 25%, so you’ll put zero in the salary/hourly wage reduction column. 

For more in-depth examples, check out Step 3 in our PPP loan spending guide.

Step 2. Determine if the Salary/Hourly Wage Reduction Safe Harbor is met.

Wage Reduction_2

Safe Harbors are your friend! The Salary/Hourly Wage Reduction Safe Harbor is a legal provision that helps reduce your total salary/hourly wage reduction if you meet certain conditions.

A. Enter the employee’s annual salary or hourly wage as of February 15, 2020. 

B. Enter the employee’s average salary or hourly wage between February 15, 2020 and April 26, 2020 (yes, this could be different from the forgiveness window). 

  • If the number from B is equal to or greater than the number from A, move on to Step 3. 
  • If the number from B is less than A, proceed to C. 

C. Enter the employee’s average salary or hourly wage as of the earlier, December 31, 2020 or the date the application is submitted. Is the number from C greater than or equal to the number from A? If so, you’ve met the safe harbor requirement and can enter zero in the salary/hourly wage reduction column. If not, move on to Step 3. 

Example: 

A. Your employee’s average salary as of February 15, 2020 was $55,000. 

B. Your employee’s average salary between February 15, 2020 and April 26, 2020 was $48,000.

  • $48,000 (B) is not equal to or greater than $55,000 (A). We need to move on to C. 

C. Your employee’s average salary as of December 31, 2020 is $50,000. 

  • $50,000 (C) is less than $55,000 (A). The safe harbor hasn’t been met and you need to proceed to Step 3.

Step 3: Determine the Salary/Hourly Wage Reduction.

Wage Reduction_3

These calculations tell you how much your eligible forgiveness amount is reduced for each employee since you haven’t met the full salary/hourly wage forgiveness requirement.

A. Multiply your employee’s average salary or hourly wage between January 1, 2020 and March 31, 2020 by 0.75. This is the number you enter in Step 1, B. 

B. Subtract your employee’s average salary or hourly wage during the forgiveness period (from Step 1, A) from the number in Step 3, A. 

For hourly workers:

Wage Reduction_4

C. Enter your employee’s average number of hours worked in the first quarter of 2020. 

D. Multiply the number from Step 3, B by the number from Step 3, C. Then multiply this amount by 24 (if you’re using the 24-week covered period) or 8 (if you’re using the eight-week covered period). This is the number you’ll put into the salary/hourly wage reduction column.

For salaried workers:

Wage Reduction_5

E. Multiply the amount from Step 3, B by 24 (if you’re using the 24-week covered period) or 8 (if you’re using the eight-week covered period). Then divide this number by 52. This is what you’ll put in the salary/hourly wage reduction column.

Example (salaried worker): 

Your employee’s average salary during the forgiveness period was $40,000 (Step 1, A). Their average salary in the first quarter of the year was $50,000 (Step 1, B). You’re using the eight-week covered period.

A. Step 1, B x 0.75

$55,000 x 0.75 = $41,250

B. Step 3, A – Step 1, A

$41,250 – $40,000 = $1,250

E. Step 3, B x 8 = Step 3, E

Step 3, E / 52 = Salary/hourly wage reduction

$1,250 x 8 = $10,000

$10,000 / 52 = $192.31

You will put $192.31 in the salary/hourly wage reduction column.

Example (hourly worker): 

You paid your employee an hourly wage of $13 during the forgiveness window (Step 1, A). Their average hourly wage in the first quarter of 2020 was $20 (Step 1, B). You’re using the 24-week covered period. 

A. Step 1, B x 0.75

$20 x 0.75 = $15

B. Step 1, A – Step 3, A

$15 – $13 = $2

C. Average hours worked per week during the forgiveness period: 30

D. Step 3, B x Step 3, C = Step 3, D

Step 3, D x 8 = Salary/hourly wage reduction

$2 x 30 = $60

$60 x 24 = $1,440

You will put $1,440 in the salary/hourly wage reduction column.

Schedule A Worksheet_2

FTE Reduction Exceptions: This is where you will adjust for any FTE reduction exceptions. You will enter the FTE of each reduced employee that meets any of the following guidelines (see the New guidance section for more details about these exceptions):

  • Employee rejected your offer to rehire them
  • Employee rejected your offer to restore their hours or salary or wages during the covered period
  • Employee was fired due to a legal cause
  • Employee voluntarily resigned
  • Employed voluntarily requested and received a reduction of hours

If you replaced the employee with another employee, do not include the FTE here. This is only for vacant positions. 

Schedule A Worksheet_3

Box 1: Add up the cash compensation column. 

Box 2: Total the average FTE lines of the table. Include the FTE number in the FTE Reduction Exceptions line. 

Box 3: Add up the salary/hourly wage reduction column. 

Table 2

Table 2 is used for employees who were:

  • US-based employees 
  • Employed during the Covered Period or Alternative Payroll Covered Period
  • Earned more than an annualized rate of $100,000 for any pay periods in 2019
Schedule A Worksheet_4

Employee’s Name: List each employee. 

Employee Identifier: Put the last four digits of each employee’s Social Security Number. 

Cash Compensation: Put the amount paid to the employee during the forgiveness period. Again, do not include independent contractors, self-employed persons, partners, or owner-employees.

No employee’s total cash compensation can exceed $15,385 (the $100,000 annual salary cap). You should not put more than $15,385 in this box. If you paid an employee more than $15,385 during the forgiveness window, the excess amount of $15,385 is not eligible for forgiveness. 

Average FTE: Enter the employee’s average FTE during the Covered Period or Alternative Payroll Covered Period. You can use the Simplified Method or Other Method, but make sure that you are consistent and always use the same method throughout your application. 

Box 4: Total the cash compensation column. 

Box 5: Total the average FTE column. 

Schedule A Worksheet_5

FTE Reduction Safe Harbor 2

The FTE Reduction Safe Harbor will make you exempt from reducing your loan forgiveness if you don’t maintain your average FTEs (but only if certain conditions are met). There are two seperate safe harbors. 

The first is if you can demonstrate that you were unable to operate between February 15, 2020 and the end of the Covered Period at the same level of business activity as before February 15, 2020 due to COVID-19 related restrictions. If you meet this safe harbor skip this step. You’ll indicate that you meet this safe harbor on the Schedule A. 

If you don’t meet this safe harbor then, follow the next steps to see if you meet the second safe harbor. 

Schedule A Worksheet_6

Step 1: Enter your total average FTEs between February 15, 2020 and April 26, 2020. You must use the same method you used for Table 1 and 2. In other words, if you used the Simple Method, use the Simple Method here. If you used the Other Method, use that here. 

Step 2: Enter your total FTE during the pay period that included February 15, 2020. Again, you must use the same FTE calculation method. 

Step 3: If the number from Step 2 is greater than the number from Step 1, proceed to Step 4. If the number is not greater then you haven’t met the Safe Harbor requirements and must complete Line 13 of Schedule A (we’ll walk you through that, don’t worry). 

Step 4: Enter your total FTE as of the earlier of December 31, 2020 and the date the application is submitted.  

Step 5: If Step 4 is greater than or equal to Step 2, then you’ve met the Safe Harbor requirements and will enter 1.0 on Line 13 of Schedule A. If not, you’ll need to complete Line 13 of Schedule A. 

PPP Schedule A

PPP Schedule A Worksheet, Table 1 Totals

Schedule A_1

Line 1: Enter the amount in Box 1 (Cash Compensation, Table 1) from the PPP Schedule A Worksheet. 

Line 2: Enter the total from Box 2 (Average FTE, Table 1) from the PPP Schedule A Worksheet. 

Line 3: Enter the total from Box 3 (Salary/Hourly Wage Reduction) from the PPP Schedule A Worksheet. If you paid all of your employees at least 75% of their average salary or hourly wage, check the box and enter zero on Line 3. 

PPP Schedule A Worksheet, Table 2 Totals

Schedule A_2

Line 4: Enter the total from Box 4 (Cash Compensation, Table 2) from the PPP Schedule A Worksheet.

Line 5: Enter the total from Box 5 (Average FTE, Table 2) from the PPP Schedule A Worksheet. 

Non-Cash Compensation Payroll Costs During the Covered Period or the Alternative Payroll Covered Period

Schedule A_3

Line 6: Enter the total that you paid for your portion of your employee’s health insurance during the Covered Period or Alternative Payroll Covered Period. Don’t include health insurance contributions made on the behalf of self-employed individuals, general partners, or owner-employees of an S corp. Those payments will be included in the total on Line 9.

Line 7: Put the total that you paid in employer contributions to employee retirement plans during the Covered Period or Alternative Payroll Covered Period. Don’t include retirement contributions made on the behalf of self-employed individuals, general partners, or owner-employees of an S corp. Again, those will be included on Line 9.

Line 8: Enter the total amount you paid for employer state and local taxes on employee compensation. 

Compensation to Owners 

Schedule A_4

Line 9: Put the total that you paid to owner-employees, self-employed individuals, or general partners. Don’t include this total in Table 1 or Table 2 of the PPP Schedule A Worksheet. If more than one owner was paid, include a separate table with the name and payments to each owner. Include any payments made towards owner health insurance or retirement plans here. 

Remember that, no owner can be compensated more than $15,385  (for the eight-week Covered Period) or $20,833 (for the 24-week Covered Period) from PPP loan proceeds if you want to receive full forgiveness. No individual accounted for on this line can exceed that amount.

Total Payroll Costs

Line 10: Add Lines 1, 4, 6, 7, 8, and 9. This is your total payroll cost. 

Full-Time Equivalency (FTE) Reduction Calculation

Schedule A_5

First, check to see if you meet any of the following criteria:

  • No reduction in employees or average paid hours: If you did not reduce employee headcount or hours, check the box and skip to Line 13. Enter 1.0 on Line 13. 
  • FTE Reduction Safe Harbor 1: If you can demonstrate that you were unable to operate between February 15, 2020 and the end of the covered period at the same level of business activity as before February 15, 2020 due to COVID-19 related restrictions, check the box. Enter 1.0 on Line 13. 
  • FTE Reduction Safe Harbor 2: If you met the safe harbor guidelines in Step 5 of the FTE Reduction Safe Harbor section of the PPP Schedule A Worksheet, you’ll skip Lines 11 and 12 and enter 1.0 on Line 13. 

If you don’t meet any of the above criteria, proceed to Line 11. 

Schedule A_6

Line 11: Enter your average FTE during your baseline period. See the New guidance section for a list of the reference periods. 

Line 12: Enter your total average FTE (add Lines 2 and 5). 

Line 13: Divide Line 12 by Line 11 and put that number here. This is your FTE Reduction Quotient. If you met the FTE Safe Harbors or did not reduce your employee headcount or hours, enter 1.0. 

Example:

Your average FTEs during the reference period was 6.0. Your average FTEs from PPP Schedule A is 3.8. Calculating your FTE Reduction Quotient looks like this:

3.8 / 6.0 = 0.63 

PPP Loan Forgiveness Calculation Form

Loan Calculator App_1

Business Legal Name: Put your business’s legal name. This must match the legal name you used on your PPP loan application (SBA Form 2483 or your lender’s application). Do not enter your trade name or DBA name here. 

DBA or Tradename: If your business goes by a name other than its legal name, enter that here. If you only use your legal name, leave this blank. Again, this must match what you put on your PPP loan application. 

Business Address: Enter the same address you used on your PPP loan application unless your address has changed. 

Business TIN (EIN, SSN): If your business has an EIN, put that here. If you’re a sole proprietor, enter your social security number. 

Business Phone: Put the same phone number you used on your PPP loan application, unless your number has changed. 

Primary Contact: Enter the name of the person who is the primary contact for the PPP loan. This should be the same person you listed on your PPP loan application. 

E-mail address: Put the email address of the primary contact. 

Loan Calculator App_2

SBA PPP Loan Number: Enter the number the SBA assigned to your loan. If you don’t know this number, contact your lender. 

Lender PPP Loan Number: Enter the loan number your lender assigned to the loan. If you don’t know this number, contact your lender. 

PPP Loan Amount: Enter the total loan amount that you received. 

PPP Loan Disbursement Date: Put the date that you received your first loan disbursement from your lender.

Loan Calculator App_3

Employees at Time of Loan Application: Enter the number of employees you had when you completed your PPP Loan Application. This is simply the total number of employees you listed on your PPP Loan Application, regardless of hours or other factors.  

Employees at Time of Forgiveness Application: Put the number of employees you have now, as you apply for loan forgiveness. 

EIDL Advance Amount: If you received an Economic Injury Disaster Loan (EIDL) advance, put the amount of the advance here. 

EIDL Application Number: If you applied for an EIDL, put your application number here.  

Loan Calculator App_4

Payroll Schedule: Check the box that describes your payroll schedule. 

Covered Period: The first date of the Covered Period is the date of your first loan disbursement. The last day of the Covered Period is either:

  • 24 weeks (or 168 days) from your first loan disbursement
  • If you received you loan prior to June 5, 2020, you can choose to use the eight-week covered period, which ends eight weeks (or 56 days) from your first loan disbursement date

Alternative Payroll Covered Period: If you choose to use an Alternative Payroll Covered Period, enter the dates here. The first date should be the first day of the first pay period after your initial loan disbursement. The last day is either 24 weeks (or 168 days) or eight weeks (or 56 days) from the first date. 

If you received PPP loans in excess of $2 million: Check this box if you, along with any affiliates, received more than $2 million in PPP loans. 

Forgiveness Amount Calculation 

Payroll and Nonpayroll Costs

Loan Calculator App_5

For Lines 2 through 4 (non-payroll-related costs), only include payments that you want to include in the forgiveness amount. 

Line 1: Enter the number on Line 10, PPP Schedule A. These are your total eligible payroll costs. 

Line 2: Enter the total you paid or incurred for business mortgage interest during the Covered Period. This interest must be for a business mortgage incurred before February 15, 2020. If you’re using an Alternative Payroll Covered Period, you must use the Covered Period dates here. Do not include prepayments, which are payments for mortgage interest incurred after the covered period. In other words, you can’t use your PPP loan to pay the next six months of mortgage interest.

Line 3:  Enter the total you paid or incurred for business rent or lease during the Covered Period. This amount must be based on a rent or lease agreement made prior to February 15, 2020. Again, if you’re using an Alternative Payroll Covered Period, you must use the Covered Period dates here. 

Line 4: Enter the total you paid or incurred for utilities during the Covered Period. Service for these utilities must have begun before February 15, 2020. Business utilities include electricity, gas, water, transportation, telephone, or internet access.

Adjustments for Full-Time Equivalency (FTE) and Salary/Hourly Wage Reductions 

Loan Calculator App_6

Line 5: Enter the amount on Line 3, PPP Schedule A. This is your total salary/hourly wage reduction. 

Line 6: Add up Lines 1 through 4. Then, subtract Line 5 from the total. Enter that number here.  If the amount is less than zero, enter zero. 

Here’s an example:

Line 1: $30,168.84

Line 2: $0

Line 3: $8,000

Line 4: $1,000

Line 5: $2,016.92

$30,168.84 + $0 + $8,000 + $1,000 = $39,168.84

$39,168.84 – $2,016.92 = $37,151.92

Line 7: Put the number from Line 13, PPP Schedule A. This is your FTE Reduction Quotient. 

Potential Forgiveness Amounts

Loan Calculator App_7

Line 8: Multiply Line 6 by Line 7. This accounts for the FTE reduction ratio. 

For example:

Line 6: $37,151.92

Line 7: 0.63

$37,151.92 x 0.63 = $23,529.55

Line 9: Enter your total PPP loan amount. 

Line 10: Divide Line 1 by 0.60 and enter that number here. This adjusts the forgiveness amount to ensure that at least 60% was used for payroll costs. 

For example:

Line 1: $30,168.84

$30,168.84 / 0.60 = $50,281.40

Forgiveness Amount 

Line 11: Enter the smallest of Lines 8, 9, and 10. This is the forgivable amount of your PPP loan. 

For example:

Line 8: $23,529.55

Line 9: $40,000

Line 10: $50,281.40

In this example you would put $23,529.55. And if you’re wondering why this person’s loan forgiveness was reduced so much, it’s because their FTE reduction quotient was 0.63. 

Certifications

The last page of the application has certifications that you’ll need to initial next to, indicating that each certification is true. Let’s break these certifications down. 

Certifications

The dollar amount for which forgiveness is requested: This is asking you to confirm that… 

  • The amount that you are requesting to have forgiven was used only for costs eligible for loan forgiveness.
  • You included all applicable reductions (you did this math in PPP Schedule A).
  • At least 60% of the forgiveness requested is made up of payroll costs (you made this adjustment on Line 10 of the PPP Loan Forgiveness Calculation Form).
  • If you use a 24-week Covered Period, you only include 2.5 month’s worth of compensation for any owner-employee, self-employed person, or general partner, and this compensation was capped at $20,833.
  • If you use an eight-week Covered Period, you only include eight weeks’ worth of compensation for any owner-employee, self-employed person, or general partner, and this compensation was capped at $15,385. 

If the funds were knowingly used for unauthorized purposes, the federal government may pursue recovery of loan amounts: Basically, if you lie on your application or include totals for money used for non-forgivable costs, the government can recover that amount and charge you with fraud. If you’re unsure about an expense, contact your lender and double check.  

Accurately verified the payments for the eligible payroll and non-payroll costs: This means that you’ve confirmed that the payments that you’re claiming on your application actually happened. In other words, you didn’t just assume that you paid rent during the forgiveness period; you confirmed that you paid rent via documentation. 

I have submitted to the Lender the required documentation: In the next section, we’ll discuss the required documentation. This certification is asking you to confirm that you did send this documentation to your lender. 

The information provided in this application and the information provided in all supporting documents and forms is true and correct in all material respects: Again, this is asking you to confirm that you’re being truthful and not forging supporting documentation. 

The tax documents I have submitted to the Lender are consistent with those the Borrower has submitted/will submit to the IRS and/or state tax or workforce agency: This asks you to confirm that the documents that you submit to the lender are consistent with the documents you’ll submit to the IRS. It also asks you to confirm that your lender can share your tax information with SBA-authorized agents. 

I understand, acknowledge, and agree that SBA may request additional information: You acknowledge that you may need to provide more information to have your loan forgiveness application processed.

If the Borrower has checked the box for FTE Reduction Safe Harbor 1 on PPP Schedule A: You’re certifying that if you checked the box stating that you were unable to restore your business activity to February 15, 2020 levels, that statement is indeed true. 

Sign and date: The last step is to sign and date the application. Also, print your name and include your title. 

PPP EZ loan forgiveness application breakdown

Loan Calculator App_1

Business Legal Name: Put your business’s legal name. This must match the legal name you used on your PPP loan application (SBA Form 2483 or your lender’s application). Do not enter your trade name or DBA name here. 

DBA or Tradename: If your business goes by a name other than its legal name, enter that here. If you only use your legal name, leave this blank. Again, this must match what you put on your PPP loan application. 

Business Address: Enter the same address you used on your PPP loan application unless your address has changed. 

Business TIN (EIN, SSN): If your business has an EIN, put that here. If you’re a sole proprietor, enter your social security number. 

Business Phone: Put the same phone number you used on your PPP loan application, unless your number has changed. 

Primary Contact: Enter the name of the person who is the primary contact for the PPP loan. This should be the same person you listed on your PPP loan application. 

E-mail address: Put the email address of the primary contact. 

Loan Calculator App_2

SBA PPP Loan Number: Enter the number the SBA assigned to your loan. If you don’t know this number, contact your lender. 

Lender PPP Loan Number: Enter the loan number your lender assigned to the loan. If you don’t know this number, contact your lender. 

PPP Loan Amount: Enter the total loan amount that you received. 

PPP Loan Disbursement Date: Put the date that you received your first loan disbursement from your lender.

Loan Calculator App_3

Employees at Time of Loan Application: Enter the number of employees you had when you completed your PPP Loan Application. This is simply the total number of employees you listed on your PPP Loan Application, regardless of hours or other factors.  

Employees at Time of Forgiveness Application: Put the number of employees you have now, as you apply for loan forgiveness. 

EIDL Advance Amount: If you received an Economic Injury Disaster Loan (EIDL) advance, put the amount of the advance here. 

EIDL Application Number: If you applied for an EIDL, put your application number here.  

Loan Calculator App_4

Payroll Schedule: Check the box that describes your payroll schedule. 

Covered Period: The first date of the Covered Period is the date of your first loan disbursement. The last day of the Covered Period is either:

  • 24 weeks (or 168 days) from your first loan disbursement
  • If you received you loan prior to June 5, 2020, you can choose to use the eight-week Covered Period, which ends eight weeks (or 56 days) from your first loan disbursement date, if you received your loan prior to June

Alternative Payroll Covered Period: If you choose to use an Alternative Payroll Covered Period, enter the dates here. The first date should be the first day of the first pay period after your initial loan disbursement. The last day is either 24 weeks (or 168 days) or eight weeks (or 56 days) from the first date. 

If you received PPP loans in excess of $2 million: Check this box if you, along with any affiliates, received more than $2 million in PPP loans. 

Forgiveness Amount Calculation

Payroll and Nonpayroll Costs

Loan Calculator App_5

Line 1: Enter your total payroll cost. This line will include the total of all of the following:

  • Cash compensation: This is the total gross salary, wages, tips commissions, paid leave and dismissal or separation pay paid to employees during the Covered Period or Alternative Covered Period.
    • For an eight-week Covered Period, no employee can exceed $15,385 in pay. For a 24-week Covered Period, no employee can exceed $46,154 in pay. 
  • Employee benefits: This includes employee health insurance, employer contributions to retirement plans, and any state and local payroll taxes paid that you paid.
    • If you’re self-employed, a general partner, or S corp owner-employee, don’t include payments made towards health insurance or retirement plans.
  • Owner compensation: This is what you paid yourself if you’re self-employed, a general partner, or an owner-employee of an S corp. If you use a 24-week Covered Period, this amount is capped at $20,833. If you use an eight-week Covered Period, the cap is $15,385. 

Line 2: Enter the total paid or incurred for business mortgage interest during the Covered Period. This interest must be for a business mortgage incurred before February 15, 2020. If you’re using an Alternative Payroll Covered Period, you must use the Covered Period dates here. Do not include prepayments, which are payments for mortgage interest incurred after the covered period. In other words, you can’t use your PPP loan to pay the next six months of mortgage interest.

Line 3: Enter the total paid or incurred for business rent payment during the Covered Period. This amount must be based on a rent or lease agreement made prior to February 15, 2020. Again, if you’re using an Alternative Payroll Covered Period, you must use the Covered Period dates here. 

Line 4: Enter payments for utilities during the Covered Period. Service for these utilities must have begun before February 15, 2020. Business utilities include electricity, gas, water, transportation, telephone, or internet access. 

Potential Forgiveness Amounts

Loan Calculator App_6

Line 5: Add Lines 1, 2, 3 and 4. 

Line 6: Enter your PPP loan amount. 

Line 7: Divide Line 1 (your total payroll costs) by 0.60. This adjusts the forgiveness amount to ensure that at least 60% was used for payroll costs. 

For example:

Line 1: $20,000

$20,000 / 0.60 = $33,333.33

Forgiveness Amount

Line 8: Enter the smallest of Lines 5, 6, and 7. This is the amount of your loan forgiveness. 

Certifications

The last page of the application are the certifications. You’ll need to initial next to each certification to indicate that it’s true. You can see a full breakdown of each certification here

Certifications

The EZ application includes a couple additional certifications. To be eligible for the EZ application, you must be able to initial next to at least one. They are:

The Borrower did not reduce the number of employees or the average paid hours of employees between January 1, 2020 and the end of the Covered Period: This confirms that you didn’t reduce the number of employees or paid hours during the time frame indicated. If you did reduce employees or paid hours in this time period and you were unable to rehire those positions on or before December 31, 2020, you can still initial here. If you’re self-employed with no employees, you’ll initial here. 

The Borrower was unable to operate between February 15, 2020, and the end of the Covered Period at the same level of business activity as before February 15, 2020 due to compliance with requirements: Initial here if you were able to restore your business activity levels to pre-February 15, 2020 levels during the Covered Period. 

Required documentation

You are so close to being done! The very last thing to do is compile your supporting documentation to submit with your application. Here’s what you’ll need. 

To verify payroll costs:

In general, you need to include documentation that confirms the cash and non-cash benefit payments you paid to your employees during the forgiveness window. Some examples are:

  • Bank account statements
  • Payroll reports that show the amount of cash paid to each employee
  • Federal tax forms, like the IRS Form 941
  • State tax forms, like state quarterly payroll reports and unemployment insurance tax filings
  • Payment receipts, canceled checks, or account statements showing how much you paid toward employer contributions for employee health insurance and retirement plan contributions. 

To verify FTE totals (not necessary for the EZ application):

You need to include documentation showing the average number of FTEs on payroll per month during the reference period you used. This could be:

  • Payroll reports
  • Federal payroll tax filings, like the IRS Form 941
  • State quarterly payroll tax filings
  • Unemployment insurance tax filings 

To verify non-payroll costs:

  • Business mortgage interest payments: 
    • Lender amortization schedule
    • Receipts or canceled checks for payments made during the forgiveness period
    • Lender account statements from February 2020 
    • Lender account statements verifying interest amount and payments made during the months of the Covered Period plus one month after the end of the Covered Period
  • Business rent or lease payments:
    • Current lease agreements
    • Receipts or canceled checks for payments made during the forgiveness period
    • Lessor account statements from February 2020 
    • Lessor account statements from the Covered Period plus one month after the end of the Covered Period verifying eligible payments 
  • Business utility payments:
    • Invoices from February 2020
    • Invoices paid during the Covered Period
    • Receipts, canceled checks, or account statements verifying payments made during the Covered Period 

In addition to the documentation that you must submit with your application, there’s also documentation that you’ll need to maintain. This includes:

  • PPP Schedule A Worksheet (or its equivalent — not necessary for the EZ application)
  • Documentation for each employee supporting the details in PPP Schedule A Worksheet, Table 1 (not necessary for the EZ application)
  • Documentation for each employee supporting the details in PPP Schedule A Worksheet, Table 2 (not necessary for the EZ application)
  • Copies of employee job offers and refusals, firings for cause, voluntary resignations, and requests by employees for reductions in work schedule 
  • Documentation supporting the FTE Reductions Safe Harbor (not necessary for the EZ application)
  • Documentation supporting the certification that wages and employee headcount were not reduced during the Covered Period 
  • Documentation supporting the certification that the borrower was unable to operate between February 15, 2020 to the end of the Covered Period at the same level of business activity on or before February 15, 2020 

Next steps

It’s finally time to submit your loan forgiveness application. Send this bad boy in and then pour yourself a deep, deep glass of wine. You deserve it. 

Your lender should give you a loan forgiveness determination within 60 days of submitting your application. If you don’t hear from them after 60 days, reach out about the status of your application. 

Congratulations, you’ve done it! We know this is a lot of work. But we truly believe that the reward—having your PPP loan forgiven—is worth the time and energy (and math) required in the PPP loan forgiveness application process.

Our COVID-19 Small Business Resource Hub has legislation updates, advice, and support.

Updated: September 14, 2020

Andi Smiles
Andi Smiles Andi is a small business financial consultant and coach who teaches business owners to take control of their finances. She’s helped hundreds of self-employed folx organize and understand their business finances, while also uncovering their emotional relationship with money.

Comments

  • Eric Obrien

    Thank you for updating the PPP Forgiveness Report. So just something I wanted to point out. For us that are Owners, Line 9 is manually entered. If we are Owners aka Single Person S-Corp we should remove the amount from Line 1 and make it zero. otherwise, Gusto is double counting. This has nothing to do with Gusto is it just Line 9 is a manual field. Line 1 is automatically updated for me because I’m a single person s corp that ran payroll. Please let me know if this is incorrect

    Reply
  • Senny Cheung

    Thank you for such a detailed explanation. I might have missed the instructions on new hires. Where do we capture the payroll and FTE for new hires, who were not on the payroll during the baseline period. Ex. we hired one new person during the covered period, who had not been on our payroll. Apologies if I missed this in the instructions.

    Reply
    • Gusto Editors

      Hi Senny — the SBA has not yet provided guidance on how to capture the payroll and FTE for new hires, especially if your FTE number in the forgiveness period is larger than the FTE number in the lookback period. We’ll update when we know more!

      Reply
  • Michele

    Great information! As a self-employed person, what if my earnings went down in the first qtr of 2020 compared to my monthly average earnings (from sched c 2019)? Does that mean I can not pay myself the 2019 monthly figure but instead the first qtr monthly avg? Thx!

    Reply
    • Gusto Editors

      Hi Michele — we recommend you consult a CPA or tax advisor for specific guidance on your situation.

      Reply
  • JOHN E SCHINDLER

    Where exactly do we turn this into?

    Reply
  • Jackie

    All of our employees are salaried and are paid on the 15th and last day of the month. We received funds on April 30 which was also pay day. Should this payroll be included? If all funds are not used, can the pay date on June 30th be counted? Can The April 30th and June 30th payrolls both be included in the loan forgiveness?

    Reply
    • Gusto Editors

      Hi Jackie — generally, payroll costs are eligible as long as they were either paid or incurred during your covered period. The rules do allow you to use an alternative payroll covered period which would start at the beginning of your next pay period following disbursement. However, to use this alternative covered period, you have to run payroll on a bi-weekly basis or more frequently. Since you run your payroll twice a month, you’ll likely need to start your covered period on the day that your loan is disbursed. We recommend that you confirm the exact dates of your covered period with your lender. With this in mind, payroll that is disbursed on the same day as your loan disbursement will likely be included in forgivable PPP expenses. You will then have exactly 8 weeks to pay or incur payroll for your team in order to be eligible for forgiveness.

      Reply
  • Michael

    I see the note at the top about regarding PPP Flexibility Act. Has this guide been updated to reflect those changes? Also as a sole proprietorship, how do I prove payroll to myself to qualify for loan forgiveness

    Reply
  • Tess Pablo Teittinen

    Thank you, this is very helpful.

    Reply
  • Lois Venar

    Can I buy this directly from you instead of printing it out from my aged printer? Thanks, Lois

    Reply
    • Gusto Editors

      Hi Lois — we’re glad to hear you found this so helpful! Gusto is not a lender and is not providing loan forgiveness applications — you’ll want to speak directly with your lender to see if they can help give you a physical copy.

      Reply
  • Shannon

    Hi, thanks for this detailed article. I found one section confusing, however. It said to “A. Enter the employee’s average salary or hourly wage during the forgiveness period. This is not the total amount you paid them but their actual wage rate. “ but then in the example below in the corresponding step A it uses the amount paid. What’s the difference between ‘actual wage rate’ and ‘amount paid’? Thanks for your help to clarify.

    Reply
    • Gusto Editors

      The 25% wage reduction cap is based on an employee’s average wage, not the total amount paid to an employee. If your employee’s wage changes week to week, you’ll need to calculate their average wage over the 24-week forgiveness period.

      Reply
  • steve

    You’ve got a link in the text here to skip right to the EZ walkthrough, but it simply links to this page.

    Reply
    • Gusto Editors

      Thanks, Steve! We’ve fixed the link.

      Reply

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