SBA and Treasury release PPP loan forgiveness application + IRS releases Employee Retention Credit Form

SBA and Treasury release PPP loan forgiveness application 

On May 15, the SBA and Treasury issued the PPP application form to request forgiveness of loans under the PPP program.  As announced, the SBA will be issuing additional regulations and guidelines for borrowers to complete the application and to instruct lenders on their duties.

The form and instructions are intended  to reduce compliance burdens and simplify the process for borrowers, including:

• Options for borrowers to calculate payroll costs using an “alternative payroll covered period” that aligns with borrowers’ regular payroll cycles
• Flexibility to include eligible payroll and non-payroll expenses paid or incurred during the eight-week period after receiving their PPP loan
• Step-by-step instructions on how to perform the calculations required by the CARES Act to confirm eligibility for loan forgiveness
• Borrower-friendly implementation of statutory exemptions from loan forgiveness reduction based on rehiring by June 30
• Addition of a new exemption from the loan forgiveness reduction for borrowers who have made a good-faith, written offer to rehire workers that was declined

The form and instructions can be found here.

IRS releases draft 941 Form to claim Employee Retention Credit

Also issued was the IRS’ updated draft Form 941 (employment tax) used to claim the Employee Retention Credit (“ERC”).  This is a fifty percent credit on wages – including certain health plan costs – up to a $10,000 cap, paid after March 12, 2020.  Employers may access this credit by reducing upcoming deposits or requesting an advance credit on Form 7200, Advance of Employer Credits Due To COVID-19.

Eligible employers (including non-profit entities) for the ERC, must employ an average of 100 or fewer full-time employees in 2019.  Employers are further eligible for the ERC if they fully or partially suspend operations during any calendar quarter due to COVID-19; or, if they suffer a significant decline in gross receipts during any calendar quarter.

There are limits to the credit’s availability.  Employers who receive PPP loans are not eligible for the credit.  An employee cannot be counted toward the employer’s ERC, if the employer is allowed a Work Opportunity Tax Credit.  Also, the credit cannot be duplicated if the employer received a credit for paid sick and family leave under the Families First Coronavirus Response Act.  Wages counted for ERC cannot be included for the regular family and sick leave credit (IRS Code Section 45S).

If you have any questions about the information in this blog post, please contact John J. White or any of our attorneys.