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How to Complete the PPP Loan Forgiveness Application

If you have received a Paycheck Protection Program loan, you must complete PPP Loan Forgiveness Application if you want your PPP Loan to be forgiven. The application contains three major parts: the Calculation Form, Schedule A, and the Schedule A Worksheet.

We’ll walk you through all three parts of the application, the information they require, and where to get the payroll data you need in your Patriot account.

Use this article to help you fill out Form 3508. Forms 3508EZ and 3508S are simplified documents, so not all of these steps apply. For more information on the difference between the forms, check out our article, “Form 3508, 3508EZ, or 3508S: Which Version Should You Use for PPP Forgiveness?“

1. Calculation Form

The Calculation Form asks for general business information. It also requires some information that you can’t provide until you complete Schedule A and the Schedule A Worksheet, which come later in the application.

However, you can complete some information—if you have it on hand. Here’s a quick rundown of what you can fill out without completing Schedule A:

  • Business Legal Name (“Borrower”)
  • DBA or Trade Name (if applicable)
  • Business Address
  • Business TIN (EIN or SSN)
  • Business Phone Number
  • Primary Contact Name
  • Primary Contact Email
  • SBA PPP Loan Number
  • Lender PPP Loan Number
  • PPP Loan Amount
  • PPP Loan Disbursement Date
  • Employees at the Time of Loan Application
  • Employees at the Time of Forgiveness Application
  • Economic Injury Disaster Loan (EIDL) Advance Amount (if applicable)
  • Economic Injury Disaster Loan (EIDL) Application Number (if applicable)
  • Payroll Schedule (frequency)
  • Covered Period
    • 8- or 24 week-period starting with the Loan Disbursement Date
      • If you received your loan before June 5, you can choose between using an 8- or a 24-week period. You must use the 24-week period if you received your loan on or after June 5.
    • This date cannot extend past December 31, 2020.
  • Alternative Payroll Covered Period (RECOMMENDED)
    • 8- or 24-week period that starts with the first day of the pay period after the loan disbursement date
      • Again, if you received your loan before June 5, you can choose between using an 8- or a 24-week period. If you received your loan on or after June 5, you must use the 24-week period.
      • Example: You have a weekly paycycle that runs from Sunday to Saturday. You receive your loan on April 2, 2020, so your Alternative Covered period would start on April 5, 2020. Without the use of this method, you may have to run reports across two periods and do some proration work to decide how much of each pay truly falls under the covered period. But if you use this method, your covered period can line up with your paycycle(s), making it the easiest way to gather payroll data.
    • This date cannot extend past December 31, 2020.

Lines 2 – 4 ask you about mortgage interest, rent or lease, and utility payments. If you have this information available, enter it on these lines:

  • Line 2: Business Mortgage Interest Payments
  • Line 3: Business Rent or Lease Payments
  • Line 4: Business Utility Payments

Unfortunately, this is all you’ll be able to do without completing Schedule A and the Schedule A Worksheet. The rest of the lines include data that is calculated on Schedule A. From here, we’ll jump down on the form to Page 4.

2. Schedule A Worksheet

The Schedule A Worksheet helps you determine the figures you need to complete Schedule A. There are two tables that ask for various wage data, depending on the classification of each employee.

As a Patriot customer, you’ll be able to gather a few reports from within your account to fill out the Schedule A Worksheet. A good portion of the data you need for Schedule A won’t come directly out of a Patriot report at this time. It will need further manipulation. But don’t worry—we’ll get into that later.

There are resources out there to help you fill out these tables. If you don’t have a large amount of data and can enter it all by hand, you can use an online form on ppp.bank to enter the key data points for each employee. This will run the necessary calculations for you.

But if you’re a larger employer, data entry might not be feasible. The AICPA offers a spreadsheet (available for download here) that will let you copy and paste data in bulk. Like the ppp.bank, it takes the key data points and runs the calculations for you. And, you don’t have to enter each employee one at a time. This may seem like the obvious choice because it allows you to copy and paste your data. But, keep in mind that it could be more prone to user error since it is a spreadsheet, and you could edit the calculations unintentionally.

Regardless of if you choose the ppp.bank tool, AICPA spreadsheet, or neither, you need the same key pieces of data. So, let’s get into that.

First, you should know about full-time equivalent (FTE) employees. You need to know what an FTE is to fill out the tables on the Schedule A Worksheet…

Full-time equivalent

Are you familiar with full-time equivalent employees? The PPP loan app asks for your FTE employees across various time periods, so you have to do this calculation more than once for each employee. Although owners’ pay is included in payroll costs, owners are excluded from the FTE calculations.

The PPP considers full-time equivalents to be 40-hour employees. Use the following three steps to determine the FTE value for each employee:

  1. Take the total number of hours worked by each employee and divide it by the number of weeks in the period you are calculating for.
  2. Take the total from Step 1 and divide it by 40.
  3. Round the amount from Step 2 to the nearest tenth and limit it to 1.0 max.

There is also a simplified method for calculating this. The simple method assigns a 1.0 to any employee who works 40 hours or more, and a 0.5 to employees who work fewer than 40 hours. Be warned: this can change your forgiveness quotient, which plays a big role into how much of your loan is forgiven. It may be simpler to do it this way, but it could change your forgiveness amount, for better or worse. Regardless of which method you choose, keep it consistent across the entire application whenever you have to calculate FTEs.

There are FTE Reduction Exceptions and FTE Reduction Safe Harbors available if your FTE quotient comes out to less than a 1.00:

FTE Reduction Exceptions. If you qualify for these exceptions, your loan forgiveness amount won’t be reduced by the FTE rule. Indicate the following if your employee headcount decreased and you weren’t able to fill the position with a new employee:

  1. Made a good-faith, written offer to rehire an individual who was an employee on February 15, 2020, and you couldn’t hire similarly qualified employees for unfilled positions on or before December 31, 2020.
  2. Made a good-faith, written offer to restore hour reductions, at the same salary or wages, during the Covered Period or the Alternative Covered Period and the employee rejected the offer.
  3. Lost employees because you fired them for cause, they voluntarily resigned, or they voluntarily requested and received a reduction of their hours.

FTE Reduction Safe Harbors. The SBA also provides two additional safe harbors that exempt you from the loan forgiveness reduction based on FTE employee levels. Indicate if you:

  1. Can document that you were unable to operate between February 15, 2020 – the end of the Covered Period at the same level of business activity as before February 15, 2020 because you were complying with health guideline requirements established between March 1, 2020 – December 31, 2020. This includes sanitation, social distancing, or any other worker or customer safety requirement related to COVID-19 established by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration.
  2. Reduced your FTE levels between February 15, 2020 – April 26, 2020 AND restored levels by December 31, 2020.

In short, these exceptions and safe harbors protect you from taking a hit on loan forgiveness for a reduction in work staff that was unrelated to the inability to pay wages.

Now that you’re a little more familiar with FTEs, let’s take a look at Tables 1 and 2 on the Schedule A Worksheet.

Tables 1 & 2

There are two tables for “non-owner” employees. Enter information in Table 1 for employees you paid at an annualized rate of less than or equal to $100,000 on all pay periods in 2019. Also, add employees not employed with the company in 2019.

Table 2 is for employees you paid an annualized rate of more than $100,000 for any pay period in 2019.

Information for Table 1

Take a look at the information you’ll need for Table 1:

  • Employee Name
  • Employee Identifier
  • Cash Compensation (during the Covered Period or Alternative Covered Period)
    • You can find this information in Patriot Software by running the Payroll Details report. Find the Payroll Details Report under Reports > Payroll Reports > Payroll Details.
      • Set the date parameters to your Alternate Covered Period (if using one), and group this report by “employee.”
      • Once you run the report, you can export it to a spreadsheet and total up the compensation columns for each employee by creating a new column and summing the relevant information.
        • Exclude paid leave wages paid under the FFCRA (COVID 100, COVID ⅔, COVID Family Leave) from this total.
  • Average FTE (Total Hours Worked in Covered Period or Alternative Covered Period):
    • This information pertains to hourly employees
    • You can find this information in Patriot Software by running the Payroll Details Report (Reports > Payroll Reports > Payroll Details).
      • Be sure to set the date parameters to your Alternate Covered Period (if using one) and to group this report by “employee.”
      • Once you run the report, you can export it to a spreadsheet and total up the hours columns for each employee by creating a new column, and summing the relevant information.
        • Similar to the Cash Compensation calculation, leave out hours recorded in accordance with the FFCRA (COVID 100, COVID ⅔, COVID Family Leave).
  • Total Number Days employed during the Covered Period
    • This is only necessary for the ppp.bank tool
    • This information pertains to your salaried employees.
    • If an employee was employed through the duration of the period, this will be 168 days (24 weeks) or 56 days (8 weeks).
    • If you had to lay off or furlough staff during the covered period, you may need to refer to your employment records to determine what portion of the period those employees were covered.
  • Salary/Hourly Wage Reduction (Average Annual Salary or Hourly Wage between 1/31/2020 – 3/31/2020)
    • This information is relevant to both hourly and salaried employees.
    • You can find this information in Patriot Software by using the Payroll Details Report under Reports > Payroll Reports > Payroll Details.
      • Be sure to set the date parameters to January 1, 2020 – March 31, 2020 and to group this report by “employee.”
      • After you run the report, you can export it to a spreadsheet and total up the compensation columns for each employee by creating a new column, and summing the relevant information.
      • After determining the amount of compensation for January 1 – March 31, multiply the amount by 4 to determine the “average annual salary” of Q1 2020, for salaried employees. For hourly employees, take the total compensation and divide it by the total hours worked in Q1 to get the hourly rate.

If the employee’s wage fell below 75% of the pre-Covered Period pay rate during the Covered Period, you also need the following information to determine if there is a Salary/Hourly Wage Reduction:

  • Average Hours Worked per week between 1/1/2020 – 3/31/2020:
    • This information pertains to hourly employees.
    • You can take the total hours worked calculated under the “Average Annual Salary or Hourly Wage” (explanation above) and divide that by the number of weeks the employee worked in Q1. You may need to look at employment records or old pay stubs to determine exactly how many weeks an hourly employee worked. If the employee worked every week in Q1, you would divide the total hours by 13.
  • Hourly Wage as of 2/15/2020:
    • This information pertains to hourly employees.
    • Review the pay that includes 2/15/2020. You can view this via the Payroll Details report as well.
      • Set the date parameter to the pay date which included 2/15/2020.
      • Group the report by employees.
      • Find the employee in question in the report, and note the “average hourly wage” on that pay stub. You may have to do some math if the employee has more than one rate. If the employee has only one rate, you don’t have to worry about finding the average.
  • Average Hourly Wage between 2/15/2020 – 4/26/2020:
    • This information pertains to hourly employees.
    • Calculate this by:
      • Running a Payroll Details report for the 2/15/2020 – 4/26/2020 period.
      • Group the report by employees.
      • Add up the totals for the compensation columns and hours columns.
      • Divide the compensation columns by the hours columns to determine the average hourly rate for each employee.
  • Hourly Wage as of the earlier of 12/31/2020 or the submission date of the PPP loan app:
    • This information pertains to hourly employees.
    • Review the pay that includes 12/31/2020 or the most recent payroll. You can view this via the Payroll Details report.
      • Set the date parameter to the pay date which included 12/31/2020 or the most recent payroll.
      • Group the report by employees.
      • Find the employee in question in the report, and note the “average hourly wage” on that pay stub. You may have to do some addition if the employee has more than one rate. If the employee has only one rate, you don’t have to worry about finding the average.
  • Annual Salary as of 2/15/2020:
    • This information pertains to salaried employees.
    • Review the pay that includes 2/15/2020. You can view this via the Payroll Details report as well.
      • Set the date parameter to the pay date which included 2/15/2020.
      • Group the report by employees.
      • Find the employee in question in the report, and note the salary on that pay stub.
      • Multiply the salary by the number of pays per year this employee receives to find the annual salary as of 2/15/2020.
  • Average Annual Salary between 2/15/2020 – 4/26/2020:
    • This information pertains to salaried employees.
    • Calculate this by:
      • Running a Payroll Details report for the 2/15/2020 – 4/26/2020 period.
      • Grouping the report by employees.
      • Adding up the total for the compensation columns and divide it by the number of weeks paid in that period.
      • Multiplying the result from the step above by 52 to determine the Average Annual Salary in the listed period.
  • Annual Salary as of the earlier of 12/31/2020, or the submission date of the loan app:
    • This information pertains to salaried employees.
    • Review the pay that includes 12/31/2020 or the most recent payroll. You can view this via the Payroll Details report.
      • Set the date parameter to the pay date which included 12/31/2020, or the most recent payroll.
      • Group the report by employees.
      • Find the employee in question in the report, and note the salary on that pay stub.
      • Multiply the salary by the number of pays per year this employee receives to find the annual salary as of the earlier of 12/31/2020 or the submission date of the loan app.
  • Salary/Hourly Wage Deduction Calculation:
    • Both the AICPA and the ppp.bank tools can calculate this for you.
    • The application itself will walk you through where to put each of the values gathered above, and what to do with them.
    • The application considers a drop in compensation to 75% of pre-COVID pay to be acceptable. You need to account for anything beyond that through a Salary/Hourly Wage Deduction.

You can derive all of this information, with the exception of “Total Number of Days Employed” (which is needed for the ppp.bank online calculator), from the Payroll Details report.

Find the Payroll Details Report under Reports > Payroll Reports > Payroll Details. You will have to take the information from the report to come up with things like “Average Annual Salary between 1/1/2020 – 3/31/2020.” Don’t worry—you can export this report as a .csv to be uploaded into your spreadsheet program of choice. From there, you can perform the necessary calculations to come up with the figures needed for this part of the app.

Information for Table 2

Take a look at the information you’ll need for Table 2:

  • Cash Compensation during the Covered Period or Alternative Covered Period:
    • You can find this information in Patriot Software by running the Payroll Details report (Reports > Payroll Reports > Payroll Details).
      • Set the date parameters to your Alternate Covered Period (if using one), and group this report by “employee.”
      • Once you run the report, you can export it to a spreadsheet and total up the compensation columns for each employee by creating a new column, and summing the relevant information.
        • Exclude Paid Leave wages paid under the FFCRA (COVID 100, COVID ⅔, COVID Family Leave) from this total.
    • This pay is capped at $46,154 (24-week period) or $15,385 (8-week period).  This prevents reimbursing more than the covered salary under the act, which is $100,000 per year.
  • Total Hours Worked in Covered Period or Alternative Covered Period:
    • This information pertains to hourly employees.
    • You can find this information in Patriot Software by running the Payroll Details Report under Reports > Payroll Reports > Payroll Details.
      • Set the date parameters to your Alternate Covered Period (if using one), and group this report by “employee.”
      • Once you run the report, you can export it to a spreadsheet and total up the hours columns for each employee by creating a new column, and summing the relevant information.
        • Similar to the Cash Compensation calculation, leave out hours recorded under the FFCRA (COVID 100, COVID ⅔, COVID Family Leave).
  • Total Number Days employed during the Covered Period:
    • This is only necessary for the ppp.bank tool.
    • This information pertains to your salaried employees.
    • If you employed an employee through the duration of the period, this will be 168 days (24 weeks) or 56 days (8 weeks).
    • If you had to lay off or furlough staff during the covered period, you may need to refer to your employment records to determine what portion of the period those employees were covered.

3. Schedule A

After gathering all of the information above and completing Tables 1 and 2, you are now ready to complete Schedule A.

The first five lines of this part of the application are available from the summary data in Tables 1 and 2.

You’ll likely need to gather Line 6 (employer contributions for employee health insurance) from your accounting books.

You can find Lines 7 and 8 (employer contributions to employee retirement plans and employer state and local taxes assessed on employee compensation, respectively) by running the Payroll Details Report and grouping the results by “Totals.”

Line 9 asks for amounts paid to owners. This is the most straightforward of all the payroll sections. You need to know the following information for Line 9:

  • Owner(s) Name
  • Employee Identifier (Employee ID or last 4 of the SSN)
  • Gross wages during the Covered Period or Alternative Covered Period
  • Gross wages over 2.5-month equivalent period in 2019

The loan application instructions have an expanded definition of owners that is listed as “owner-employees/self-employed individual/general partners.” These wages are capped at different amounts, depending on whether you use an 8-week or a 24-week forgiveness period.

If you’re using a 24-week period, the owner’s earnings are capped at either $20,833 or the 2.5 month equivalent of the owner’s 2019 annual salary, whichever is lower.

If you’re using an 8-week period, the owner’s earnings are capped at either $15,385 for each individual or the eight-week equivalent of their applicable compensation in 2019, whichever is lower.

Do not include these wages in either of the tables included in Schedule A.

Completing the Calculation Form

Once you have completed Schedule A and the Schedule A Worksheet, you can return to the Calculation Form. Use the information from Schedule A to fill in the lines on this form, and complete the calculations to determine your loan forgiveness.

Documentation

After completing the application, you must submit documents with the application. The application breaks them out into Payroll, FTE, and Non-Payroll categories. And, there are some documents you need to retain for your records.

Payroll

Here are the payroll-related documents you need to submit with your PPP loan forgiveness application:

  • Bank account statements or third-party payroll service provider reports documenting the amount of cash compensation paid to employees.
  • Tax forms (or equivalent third-party payroll service provider reports) for the periods that overlap with the Covered Period or the Alternative Payroll Covered Period:
    • Payroll tax filings reported, or that will be reported, to the IRS (typically Form 941).
    • State quarterly business and individual employee wage reporting and unemployment insurance tax filings reported, or that will be reported to the relevant state.
    • Gather these tax forms from the Reports section of our software. Go to Reports > Payroll Tax Reports > Tax Filings. Select the tax year and quarter appropriate for the forms you are trying to obtain. Clicking “view” will open a .pdf of all filings made on your behalf in that quarter. This report is available to you at the end of the month following a quarter end (i.e., Q1 is available on 4/30, Q2 on 7/31, etc.).
  • Payment receipts, canceled checks, or account statements documenting the amount of any employer contributions to employee health insurance and retirement plans that you included in the forgiveness amount (PPP Schedule A, lines (6) and (7)).

FTE

For the FTE portion, you need documentation showing the average number of FTE employees on payroll per month, employed between:

  • February 15, 2019 – June 30, 2019
  • January 1, 2020 – February 29, 2020
  • February 15, 2019 – June 30, 2019; January 1, 2020 – February 29, 2020; or any consecutive 12-week period between May 1, 2019 – September 15, 2019 (seasonal employers)

Non-Payroll

You also need to submit documents relating to non-payroll expenses. These documents must show that the obligation/service existed prior to February 15, 2020, and that you made eligible payments during the Covered Period:

  • Business mortgage interest payments: Copy of lender amortization schedule and receipts or canceled checks verifying eligible payments from the Covered Period; or, lender account statements from February 2020 and the months of the Covered Period through one month after the end of the Covered Period verifying interest amounts and eligible payments.
  • Business rent or lease payments: Copy of current lease agreement and receipts or canceled checks verifying eligible payments from the Covered Period; or, lessor account statements from February 2020 and from the Covered Period through one month after the end of the Covered Period verifying eligible payments.
  • Business utility payments: Copy of invoices from February 2020 and those paid during the Covered Period and receipts, canceled checks, or account statements verifying those eligible payments.

Documents to retain

There are also documents the instructions say you must maintain for your records. You do not need to include these in your application submission. These include:

  • Schedule A Worksheet (or its equivalent)
  • Documentation supporting the listing of each individual employee in PPP Schedule A Worksheet Table 1, including the “Salary/Hourly Wage Reduction” calculation, if necessary.
  • Documentation supporting the listing of each individual employee in PPP Schedule A Worksheet Table 2; specifically, that each listed employee received during any single pay period in 2019 compensation at an annualized rate of more than $100,000.
  • Documentation regarding any employee job offers and refusals, firings for cause, voluntary resignations, and written requests by any employee for reductions in work schedule.
  • Documentation supporting the certification (if applicable) 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 compliance with health guidelines. This documentation must include copies of the applicable requirements for each borrower location and relevant borrower financial records.
  • Documentation supporting the PPP Schedule A Worksheet “FTE Reduction Safe Harbor.”

Once you have gathered these pieces of documentation, retain them for six years after the date of loan forgiveness or the date you repay the loan in full.

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