PPP Loan Forgiveness: Forms 3508, 3508EZ, and 3508S; Eligible Costs, Required Documentation, and Appeals

Description

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

Currently, borrowers must apply for loan forgiveness within 10 months after the last day of the borrower's loan forgiveness covered period. If not submitted timely, repayment will be required at the 10th month. Businesses are relying primarily on tax professionals for assistance in completing these applications.

Forms 3508 or 3508EZ must be completed to substantiate compliance. For loans of $50,000 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. Perhaps the most troubling aspect of loan forgiveness is the inability to deduct the reported costs as deductible expenses on the applicant's 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.