Maximizing Paycheck Protection Program Loan Forgiveness

by Matt Neuenswander, Tax Manager

As the 24-week covered period ends, many small businesses that participated in the Paycheck Protection Program (PPP) are turning their attention to submitting form 3508 or 3508EZ to formally request loan forgiveness. Form 3508EZ omits the Schedule A and the related worksheet found in Form 3508. However, many borrowers will need to complete the Schedule A to determine which form to use and the forgivable expenses.

For borrowers that use Form 3508, either because of a reduction in full-time-equivalents (FTE) or salaries/hourly wages, there are several strategies to maximize the potential forgiveness amount.


• Calculate the FTE for all applicable reference periods (February 15, 2019 to June 30, 2019 and January 1, 2020 to February 29, 2020) to see which results in the lowest FTE count to minimize the FTE reduction quotient.1
• Treat employees that were fired for cause, voluntarily resigned, or voluntarily requested a reduced schedule during the covered period at the same full-time equivalency level as before the reduction event.2
• Apply FTE Reduction Safe Harbors due to:

  1. Inability to operate due to compliance with requirements established or guidance related to the maintenance
    of standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID-19.
  2. Inability to rehire individuals who were employees of the borrower on February 15, 2020 or hire similarly qualified individuals for unfilled positions on or before December 31, 2020. Borrowers are required to inform the applicable state unemployment insurance office of any employee’s rejected rehire offer within 30 days of the employee’s rejection of the offer.3


• Include all eligible costs paid and incurred during the covered period, not just amounts up to the PPP loan amount.
• Use the alternative covered period for payroll costs if the loan disbursement happened mid-payroll cycle.
• Include payroll accrued during the covered period if paid by the following payroll cycle.
• If eligible costs after any salary or FTE reduction are well in excess of the loan amount, consider excluding certain types of non-payroll costs that require significant documentation to expedite the loan forgiveness review.

For additional assistance or if you have questions contact:

Matt Neuenswander, Tax Manager, Tanner LLC
801.924.5120 | mneuenswander@tannerco.com

Shawn Marchant, Tax Principal, Tanner LLC
801.990.5928 | smarchant@tannerco.com