PPP Loan Forgiveness – Action Steps

The PPP Loan you received is a 2-year loan @ 1% APR in which payments start within 6 months from the funding date. Most borrowers will request the loan forgiveness within that first 6-month period to avoid making any payments to the loan.

For the forgiveness process you might need to use the standard SBA form 3508, in which you can download with all instructions here:


It is possible that Treasury or the SBA will change the application process in the near future, so be sure to keep checking the SBA website for updates; additionally, some banks might have their own platform or portal to process the forgiveness application.Here are the general guidelines:
· You must use at least 75% of the proceeds for payroll cost, but you can use up to 100% of the loan proceeds for payroll and get 100% forgiveness this way. For the purpose of PPP, “payroll costs” include gross payroll paid to employees, employer portion of pension/retirement benefits, and employer portion of health insurance; federal payroll taxes or payroll processing fees will not be included in the calculation.

  • If you don’t use 100% of the proceeds for payroll costs, you may use up to 25% for Rent, Utilities, and Mortgage Interest of commercial property for the business, not for your home or “home office”
  • You must keep the same headcount (you will need to calculate the avg. number of full-time employees in 2019 compared to 2020 – this is a very convoluted calculation, see the instructions for more details). You are allowed to rehire employees previously laid-off and/or replace with new ones
  • You cannot include increases to the salary or additional bonus of owner-employees above the average 2019 weekly compensation
  • You are allowed to increase the compensation of any employee, but you cannot reduce any one’s salary by more than 25% (unless they are not being used as part of the calculation). Keep in mind that there is a cap of $100,000 salary cost per employee on all calculations
  • Self-employed individuals and partners that used their net income from schedule C or distributable K-1 Income for purposes of Payroll cost will receive an automatic 73.84% forgiveness for those amounts and have up to 25% that can be used for commercial Rent/Utilities/Mortgage; so all self-employees and K-1 partners will need to my payback at least a portion of the loan. NOTE: this is a very particular use case, ignore if not applicable

Failure to comply with these guidelines will result in a reduction (partially or completely) of your overall forgiveness amount. Also, keep in mind that if you received an EIDL Advance (between $1,000 and $10,000) it will also reduce the forgiveness amount as well.

Now, the covered period for mortgage Interest, rent, and utilities is exactly 8-weeks following the funding date. But for payroll, you can use either the funding date or the date of the following payroll check to start the 8 weeks. To achieve maximum forgiveness, you must take action and make these payments during that period. We recommend that you are monitoring your payroll costs, rent, utilities, and mortgage interest during this 8-week period to make sure it adheres to the guidelines. You can HIRE us for this service, only if you explicitly request it; but we will not, under any circumstance, proactively monitor for these expenses for you regardless of the engagement that we have established.

Finally, for the actual forgiveness process, you should have the capacity to prepare the application on your own and submit to your bank. If you need us to help you prepare the application, we will charge $300/hour (Minimum of 3 hours, as recommended as per SBA) for those not included in a Tax Maintenance Package. We cannot offer any guarantees of 100% forgiveness in these services, but we will working within the available guidelines to try to maximize your loan forgiveness in the same way we look for legal avenues to reduce tax liabilities when we prepare your tax returns, but there are no implicit or explicit guarantees.