SBA Will Start Accepting PPP Forgiveness Applications From Lenders on August 10, 2020

The Small Business Administration (SBA) has set a date of August 10th for lenders to begin submitting forgiveness applications for Paycheck Protection Program (PPP) loans. On July 23rd, the SBA issued a procedural notice (linked here) to lenders outlining the process of applying for forgiveness for their borrowers. The SBA has created a forgiveness platform for lenders use only for the process.

A borrower may submit a Loan Forgiveness Application before the end of the 8-week or 24-week Covered Period, provided that the borrower has used all of the loan proceeds for which the borrower is requesting forgiveness and the borrower’s loan forgiveness application accounts for any salary reductions in excess of 25% for the full covered period.

In the notice, the SBA once again stressed that “providing an accurate calculation of the loan forgiveness amount is the responsibility of the borrower, and Lenders may rely on borrower representations. Lenders are expected to perform a good-faith review, in a reasonable time, of the borrower’s calculations and supporting documents concerning amounts eligible for forgiveness.” It went on to say that the Lender must review the application and submit its decision on forgiveness, with supporting documents, to the SBA no later than 60 days after its receipt from the borrower. Furthermore, the SBA will have the opportunity to review all PPP loans at any time, if needed.


PPP loan recipients applying for forgiveness should expect the following:

  • Borrower is to submit SBA Form 3508 or 3508EZ (or Lender’s equivalent Loan Forgiveness Application) to the lender servicing their loan
  • Lender is to confirm receipt of the application and required supporting documentation (payroll and nonpayroll costs)
  • Lender is to confirm the borrower’s calculations on Form 3508 or 3508EZ (or Lender’s equivalent Loan Forgiveness Application)
  • Lender is to review eligible expenses and supporting documentation provided by the borrower
  • If the lender finds errors in the borrower’s calculations or does not feel the documentation provided is substantial for forgiveness, the Lender is expected to work with the borrower to resolve the outstanding issues.


The lender must indicate their decision as:

  • Approval in Full
  • Approval in Part
  • Denied
  • Denied without Prejudice


What should borrowers do to prepare? Talk to your lenders!

Regardless of the Covered Period a borrower chooses, it is critical to begin conversations about loan forgiveness procedures with lenders as soon as possible, particularly since lenders will be making the initial review before it goes to the Small Business Administration (SBA) for final approval.

Borrowers should get clarity from their lender on the forgiveness process, including:

  • Will applications be accepted on the SBA’s paper forms or will an online submission be required?
  • Is the lender requiring borrowers to submit documentation via email, an online portal, or in some other way?
  • What formats are acceptable when submitting supporting documentation?


How We Can Help

Our team is able to assist you during the process of applying for PPP loan forgiveness. We anticipate there may be modifications to the terms of the Paycheck Protection Program in the coming weeks and our team is closely monitoring the situation.  We will update you as any such changes or new laws are released.  Please contact your trusted Scheffel Boyle team member with questions. We are always here to help.

Watch Out for Illinois Department of Employment Security Scams

A warning has been issued to Illinois residents regarding unemployment fraud and identity theft in response to several complaints to the Illinois Department of Employment Security (IDES). Illinois Attorney General Kwame Raoul recently issued an alert stating that if you received an IDES debit card but did not apply for unemployment, you may be a victim of the scam.

The debit card is usually accompanied by a letter approving you for unemployment benefits. If you receive this but never applied for benefits through IDES, you should contact the IDES at 1-800-814-0513, visit the IDES website to report it online, or reach out to the Attorney General’s Identity Theft Hotline at 1-866-999-5630.

It is important that you do not activate the card.

Please contact our team with questions. We are always here to help.

IRS Updates FAQs on CARES Act Employee Retention Credits and Payroll Tax Deferrals

The IRS recently updated its frequently asked questions (FAQs) on the Employee Retention Credit (ERC) and payroll tax deferrals under the Coronavirus Aid, Relief, and Economic Security (CARES) Act (P.L. 116-136). These provisions encourage businesses to keep employees on their payroll during the COVID-19 global pandemic. Although the FAQs cannot be relied upon as legal authority, they indicate the IRS’s thinking.

Borrowers With Forgiven PPP Loans Can Defer Payroll Tax Deposits

Section 2302 of the CARES Act provides that, through December 31, 2020, employers may defer the deposit and payment of the employer’s portion of Social Security taxes and certain railroad retirement taxes. Half of the deferred amount is due on December 31, 2021, and the other half is due on December 31, 2022.

On June 26, the IRS updated FAQ #4 on CARES Act payroll tax deferrals, confirming that an employer who has a Paycheck Protection Program (PPP) loan forgiven under the CARES Act is entitled to defer payment and deposit of the employer’s share of Social Security tax. The update to FAQ #4 follows the enactment of the Paycheck Protection Program Flexibility Act (P.L. 116-142), which eliminated the CARES Act provision that had prevented an employer from deferring the deposit and payment of its share of Social Security taxes after its PPP loan was forgiven.



An employer that receives a PPP loan can defer payment and deposit of the employer’s share of Social Security tax not only while the PPP loan is outstanding, but also after the loan is forgiven.

The CARES Act payroll tax deferral provision essentially gives employers a two-year, interest-free loan from the federal government of approximately 6.2% of an employer’s payroll (up to $137,700 per employee, which is the 2020 Social Security wage base cap). Employers are not required to apply for or take any other steps to qualify for this “loan.” This payroll tax deposit loan is available regardless of whether the employer applied for a PPP loan or Main Street Lending Program loan.

Employee Retention Credit Updates

On June 26, the IRS updated several ERC FAQs. The ERC is a refundable tax credit equal to 50% of up to $10,000 in wages paid by an eligible employer whose business has been financially impacted by COVID-19. Each payroll period, employers may subtract the ERC from the employer’s portion of payroll tax deposits and retain (rather than remit) that amount. But if the employer does not have sufficient payroll taxes to fund the ERC, the employer can apply for a rapid refund of the ERC using IRS Form 7200.



Although the credit is determined quarterly, only $10,000 of wages per employee can be counted for all calendar quarters (i.e., the credit is currently capped at $5,000 per employee).

Several proposals are pending in Congress that would expand the amount, scope and duration of the ERC. Further action on those proposals is expected between July 20 and early August.

We understand that the IRS generally sends employers a paper check within 13 days after processing the Form 7200. But due to the number of refund requests being processed by the IRS, it may take approximately 30 days from the date the Form 7200 was submitted to receive the refund check. The IRS has set up a special unit to solely handle processing these advance refund requests.

Below is a summary of the changes made by the updated ERC FAQs:

  • FAQ #28 – Clarifies that a local health department order mandating a workplace closure for cleaning would qualify as “an order from an appropriate governmental authority” when determining if an employer qualifies for the ERC. FAQ #28 also now acknowledges that whether an employer’s business is “essential” may vary from jurisdiction to jurisdiction.
  • FAQ #30 – Clarifies that the ERC would be available to an employer who operates both an essential and non-essential business and experiences a partial suspension of more than a nominal part of their non-essential operations due to a governmental shut-down order. FAQ #30 also says that an essential business may be eligible for the ERC if it has a partial suspension due to a governmental order that requires the employer to close for a period of time during normal working hours.
  • FAQ #33 – Adds two new examples of ERC eligibility when an employer’s workplace is closed by a governmental order, but the employer can continue partial operations through teleworking. One of the new examples involves a physical therapy practice (which is partially shut down due to inability to access essential equipment), and the other involves scientific researchers (the workplace is shut down for those who do lab work, but not shut down for those who can work from home).
  • FAQ #34 – Provides six examples of ERC eligibility for partial suspensions of operations where an employer’s workplace is closed by a governmental order for certain purposes but may remain open for other purposes or where the employer is able to continue certain operations remotely or with accommodations that do not significantly disrupt the employer’s business. FAQ #34 now includes examples of ERC eligibility for workplaces subject to social distancing guidelines, such as restaurants, retail stores (which are considered partially suspended if their physical location is closed, but they continue to do business on line), grocery stores and hospitals (which are considered to have a partial suspension of operations due to a governmental order that prevents them from performing elective and non-urgent medical procedures). But FAQ #34 states that if the impact of the governmental restriction on the employer’s business is only nominal, then the ERC would not be available. This is a facts-and-circumstances test. For example, FAQ #34 says that a grocery store’s operations would not be partially suspended because a governmental order requires closure of its salad bar and other self-serve offerings, since that change does not have more than a nominal effect on the grocery store’s business operations. Similarly, a large retailer would not have a partial suspension merely because customers must wait a short time to enter the store due to compliance with social distancing guidelines.
  • FAQ #35 – Clarifies that an employer would be eligible for the ERC by reducing its work hours to comply with a governmental order requiring sanitation at certain intervals to reduce the risk of COVID-19. A new example concludes that a food processing plant would be eligible for the ERC if it normally operates 24 hours a day but has to close for five hours a day to conduct mandated deep cleaning.
  • FAQ #46 – Establishes (for the first time) a “gross receipts” test for tax-exempt organizations to qualify for the ERC. The new test includes gross receipts from all operations, including all sales and amounts received for services, investment income, contributions, gifts, grants and membership fees or dues. To determine if a tax-exempt organization has had a significant decline in gross receipts for any quarter in 2020, it must compare the quarterly gross receipts from the 2020 calendar year to the same calendar quarter in 2019.
  • FAQ #58 – Adds three new examples clarifying that employers cannot claim the ERC for amounts that are not “wages” for Federal Insurance Contributions Act (FICA) tax withholding purposes (even though employers can claim the ERC for qualified health plan expenses allocable to such wages). FAQ #58 now includes examples showing that an employer matching contribution to a 401(k) plan and employee pre-tax contributions toward dependent care assistance and qualified transportation fringe benefit cannot be the basis for ERCs.
  • FAQ #79 – Confirms that employers who received PPP loans but repaid them by May 18 (under a special safe harbor rule) are eligible for the ERC.
  • FAQ #88 – Confirms that payroll reporting agents may sign and submit Form 7200 to the IRS on behalf of a client.
  • FAQ #90 – Clarifies that an employer and its third-party payer will each be liable for employment taxes that are due as a result of any improper ERC claim filed by the third-party payer.
  • FAQ #92 – Clarifies that employers (not third-party payers) are responsible for avoiding a “double benefit” with respect to the ERC and the paid family medical leave tax credit under Internal Revenue Code Section 45S.

PPP Loan Application Deadline Extended 5 Weeks

With roughly $129 billion in PPP loans still available, an extension has been passed to allow businesses an additional 5 weeks to apply for the funds. The Senate and House both unanimously approved the extension just before the original deadline of June 30th and President Trump officially signed it into law on the July 4th holiday. Businesses who experienced difficulty due to the COVID-19 pandemic will now have until August 8th to apply for a PPP Loan.

The forgivable loans were first introduced in April by the U.S. Small Business Administration (SBA) in partnership with the U.S. Treasury to provide aid to businesses affected by the Coronavirus. A message on the SBA website states they have “resumed accepting applications July 6, 2020, at 9:00 AM EDT in response to the Paycheck Protection Program Extension Act”.

For more information on PPP loans and how to apply, click here.

Please contact your trusted Scheffel Boyle team member with questions. We are always here to help.