On June 16, 2020, Small Business Administration (SBA) and Department of the Treasury released updates and additional guidance for the PPP Loan Forgiveness Application to include the changes included with the Paycheck Protection Program Flexibility Act of 2020.

Here are some key takeaways:

There are two applications to choose from

In an effort to streamline the application process, the SBA introduced an “EZ” version that is less pages and easier to complete.

In order to use this form, companies must not have had reduced salary or hourly wages or have a reduction in full-time equivalent (FTE) counts during the covered period compared to look back periods.

There are some safe harbor options for FTE reductions, so please see the checklist on page 1 of the Form EZ Instructions to see whether your company meets the criteria to use this form.

You can find the instructions for the long-form application by clicking here.

You can pick an 8 or 24 week covered period

Probably the single biggest change with the PPP Flexibility Act was the ability for companies to choose between an 8 week and 24 week covered period.

If you are unable to use the PPP funds in an 8 week period, or haven’t been able to maintain the same number of employee hours compared to the look-back period, you now have up to 24 weeks.


Maximum Compensation + Benefits for Employees

The maximum compensation considered eligible payroll costs per employee (excluding owners) are:

24 week covered period
$46,154 ($100,000 / 52) * 24
8 week covered period
$15,385 ($100,000 / 52) * 8

This cap only applies to wages, so employer paid state and local taxes plus employer paid health and retirement benefits can exceed the cap and still be considered payroll costs eligible for forgiveness.


Maximum Compensation + Benefits for Owners

The maximum compensation considered eligible payroll costs per owner (owner-employee, a self-employed individual, or general partner) are:

24 week covered period
The lower of $20,833 or the 2.5 month equivalent of their 2019 compensation.
8 week covered period
The lower of $15,385 or 8/52 of their 2019 compensation.

Employer Paid Health Benefits
Not considered an eligible payroll cost for owners regardless of the type of business entity.

Employer Paid Retirement Benefits
Only eligible for owners of an S-corporation and capped at 2.5 months’ worth of their 2019 contribution amount.


You can use up to 40% for non-payroll costs

Another major change with the PPP Flexibility Act was the change to a 60/40 ratio of payroll cost to non-payroll costs.

When you combine this change with the extension to 24 weeks, it significantly increases the likelihood that most companies will receive forgiveness for the entire balance of the PPP loan.

How CheckWise can help

We have designed a customized PPP report to help our clients monitor their FTE counts and payroll costs during the Covered Period. As always, please feel free to call (518) 435-0570 or email payroll@checkwisepayroll.com if you have any questions.

Legal Disclaimer: CheckWise Payroll LLC is not engaged in the practice of law. The content in this article should not be construed as legal advice, and does not create an attorney-client relationship. If you have legal questions concerning your situation or the information you have obtained, you should consult with a licensed attorney. CheckWise Payroll LLC cannot be held legally accountable for actions related to its receipt.

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