PPP Forgiveness and ERC Update: Forms 3508, 3508EZ, and 3508S; Eligible Costs, Required Documentation

Description

The SBA has issued 5.2 million loans under the Payroll Protection Program totaling more than $525 billion. The SBA has said it will audit all loans over $2 million, although most of the loans were $150,000 or less.

The Consolidated Appropriations Act of 2021 allows employers to claim both PPP loan forgiveness and the Employer Retention Credit (ERC). The change is retroactive but double-dipping on wages paid is not allowed. Businesses are relying primarily on tax professionals for assistance in completing and maximizing these benefits.

Forms 3508 or 3508EZ must be completed to substantiate compliance. For loans of $150,000 or less, borrowers can complete form 3508S and omit complex FTE (full-time equivalent) calculations. For others, definitions of eligible payroll, which includes more than wages reported on form 941, and other eligible costs must be understood and included.

Early application is permitted but impacts the calculations of included costs. The forgiveness process' length leaves taxpayers not knowing if their loan was forgiven before the due date of their current year income tax return. Tax professionals must grasp the nuances of these complex applications and the latest guidance in order to best serve businesses struggling in the current economic environment.

Listen as our payroll protection loan expert explains the PPP loan forgiveness process from the due date of the initial application to ultimately appealing a decision if needed and including preparation of Forms 3508, 3508EZ, and 3508S along with required supporting documentation to substantiate compliance.