Self-Employed Guide to the PPP Forgiveness Application

Editor’s note: On February 22, President Biden announced changes to the Paycheck Protection Program. One change allows the self-employed to apply using gross income so long as they file a Schedule C. This affects loans received from March 3, 2021 onward. Check out our video below for an overview and read our guide on How to Calculate Gross Income for the PPP.



The Paycheck Protection Program was introduced in April 2020 and offered fully forgivable loans to the self-employed. Since then, changes have been made to make PPP loan forgiveness for the self-employed easier to obtain.

Forms 3508S and 3508EZ are simplified versions of form 3508. The self-employed can use either simplified version to make applying for PPP loan forgiveness a breeze.

Please note: you will not need to fill in these forms yourself. Instead, you apply for PPP forgiveness through your PPP lender, likely through an online application portal. Your lender uses these forms to create your application.

Let’s go through which one is right for you and what you need to do to apply for forgiveness today.

Which PPP forgiveness application do I use? (vertical flowchart)

Can I use form 3508S to apply for forgiveness?

If your loan amount is $150,000 or less, you can use form 3508S to apply for forgiveness.

Annotated 3508S form

This form is the simplest of the forgiveness application forms. You don’t need to show your calculations or supply any documents while applying. Instead, you provide two numbers:

  1. The amount you spent on payroll costs and;

  2. The forgiveness amount you are requesting

Self-employed individuals can take the entire PPP loan amount as owner compensation replacement so long as you use a covered period of 11 weeks or longer. As a self employed individual, your owner compensation replacement will count as payroll for the PPP. This means you can put the full loan amount as both your payroll expense and the amount you’re requesting forgiveness on.

You can skip ahead to the information you need to fill out the form here.

Can I use form 3508EZ to apply for forgiveness?

If your loan amount was more than $150,000 and you meet one of the following two conditions, you can use form 3508EZ to apply for forgiveness.

  1. For any employees earning $100,00 or less, you did not reduce the annual salary or hourly wages by more than 25% in the covered period. You must compare the covered period to the most recent full quarter prior to the covered period.

  2. a) You did not reduce the number of employees or the average hours of employees between January 1, 2020 and the end of the loan’s covered period. You may ignore employees that refused an offer to come back to work or were fired for just cause.

OR

b) You were unable to operate to the same capacity as February 15, 2020 due to compliance with rules related to the maintenance of standards of sanitation, social distancing, or any other work or customer safety requirement related to COVID-19. These rules must have been put in place 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.

Heads up: If you certify any of the above falsely to receive forgiveness and your application is audited, you could be punished with imprisonment and a fine.

Form 3508EZ Annotated

How to fill out the PPP loan forgiveness application forms

There are two main sections to PPP forgiveness forms:

  • Your business and loan information

  • Your forgiveness amount request (and calculations if applicable)

Business and loan information

For all PPP forgiveness forms, you will be required to provide the following information regarding your business and loan:

  1. Business Legal Name/DBA or Tradename, if applicable: This should be the same business name used on your PPP application and match your tax returns. Provide a DBA if what appears on the supporting documents varies from your legal name.

  2. Business Address/Business TIN (EIN, SSN)/NAICS Code/Business Phone/Primary Contact/E-mail Address: Use the same information as your original PPP application unless it’s changed.

  3. First Draw/Second Draw PPP Loan: Check off whether this forgiveness application is for your first or second PPP loan. If you are applying for forgiveness for a PPP loan from 2020, it is a first draw PPP loan.

  4. SBA PPP Loan Number: This will be the E-tran number generated by the SBA. Each loan has a corresponding E-tran number. If you cannot find your number, contact your lender as they will have it on file.

  5. Lender PPP Loan Number: This is the number assigned to your loan by your lender and will be available on your signed loan documents. If you cannot find your number, your lender will have it on file.

  6. PPP Loan Amount: The full loan amount you received. This can be confirmed in your bank activity, on the loan agreement, or in a confirmation email. There should have been no charged fees or amounts otherwise taken away.

  7. PPP Loan Disbursement Date: The date the funds arrived in your bank account. This can be confirmed in your bank account activity. If you received the funds in stages, enter the first date.

  8. Employees at Time of Loan Application/Employees at Time of Forgiveness Application: The actual amount of employees, not Full-Time Equivalents (FTE). For example, one full-time and one part-time employee would count as two total employees. If you have no employees on payroll, you can put 0 here.

  9. Covered Period: The 8 to 24 week period starting from your disbursement date.

Applicants using Form 3508S are finished after certifying and signing the form. Applicants using Form 3508EZ continue reading.

  1. If Borrower (together with affiliates, if applicable) received loans in excess of $2 million: Check this box if applicable.

Filling out your forgiveness amount request on form 3508EZ without payroll

If you are self-employed, an independent contractor, or a sole proprietorship, here’s how to fill out the forgiveness amount request without payroll. This applies to you if you did not have payroll costs at the time of your initial loan application and during the loan’s covered period.

Line 1: This will be your owner compensation replacement value. This is now two and a half months of your net or gross income as reported on your 2019 or 2020 Schedule C (net or gross income x 2.5 ÷ 12). The maximum amount you can take is $20,833.33 based on the cap of $100k annualized earnings. This means you can now apply for forgiveness on the entire loan using just your owner compensation replacement amount.

Lines 2-4: Any applicable mortgage interest, rent/lease payments, or utilities payments you want to apply for forgiveness on.

Line 5: The sum of Lines 1-4.

Line 6: Your PPP loan amount.

Line 7: Line 1 divided by 0.6.

Line 8: The smallest value of Lines 5-7.

Because of how the calculation of owner compensation replacement has changed, your amounts in Lines 5 & 6 should be the same number and the lowest of the three meaning you will be eligible for forgiveness on the entirety of the loan for just your owner compensation replacement.

Filling out your forgiveness amount request on form 3508EZ with payroll

If you did not reduce headcount and/or you were unable to return to full operations in compliance with work or customer safety due to COVID-19, the form will require you to report all applicable payroll costs on Line 1.

Line 1: Report all eligible payroll expenses that you are applying for forgiveness on. This includes:

  • Gross salary, wages, tips, commissions, and paid leave (capped at $100k annualized per employee or $46,154 within the the 24 week period)

  • Allowances for dismissal or separation paid or incurred in the covered period

  • Group employee benefits including employee health insurance, retirement plans, and state and local taxes assessed on employee compensation excluding taxes withheld from employee’s pay

  • (For sole proprietors and partnerships) your owner compensation replacement/proprietor costs

Lines 2-4: Any applicable mortgage interest, rent/lease payments, or utilities payments you want to apply for forgiveness on.

Line 5: The sum of Lines 1-4.

Line 6: Your PPP loan amount.

Line 7: Line 1 divided by 0.6.

Line 8: The smallest value of Lines 5-7.

Documents required for your application

Regardless of what form you’re using to apply for forgiveness, the SBA can request documents to support your application at any time. You can learn more in our guide on PPP audits.

If you’re using form 3508EZ, you must provide the following documents when applying.

Prepare these documents and keep them somewhere easily accessible before applying for forgiveness.

Payroll expenses:

  • Bank account statements or a report from your payroll provider documenting payments to employees

  • Tax forms (or equivalent payroll provider reports) including:

    • Payroll tax filings reported (typically Form 941)

    • State quarterly business and individual employee wage reporting

    • Unemployment insurance tax filings

  • Payment receipts, cancelled checks, or bank account statements showing employer contributions to group employee benefits plans

  • If you checked the box indicating you kept headcount and salaries the same on the instructions form, you will still be required to report the average number of full-time equivalent employees on payroll on January 1, 2020 and at the end of the covered period. This can be done with payroll reports covering January 1 and the last payroll of your covered period.

Non-payroll expenses:

  • Business mortgage interest payments: a copy of the amortization schedule with corresponding receipts OR mortgage statements from February 2020 and the months of the covered period.

  • Business rent or lease payments: a copy of the current rent/lease agreement with receipts verifying payments OR lease statements from 2020 and from the covered period through one month after the end of the covered period.

  • Business utility payments: a copy of invoices from February 2020 and those paid during the covered period with corresponding receipts or account statements.

  • Covered operations expenditures: a copy of invoices, orders, or purchase orders paid during the covered period with corresponding receipts or account statements.

  • Covered property damage costs: a copy of invoices, orders, or purchase orders paid during the covered period with corresponding receipts or account statements. Documentation will need to be provided to prove that the costs were related to property damage and vandalism or looting due to public disturbances that occurred during 2020 and were not covered by insurance or other compensation.

  • Covered supplier costs: a copy of contracts, orders, or purchase orders in effect at any time before the covered period (except for perishable goods), copy of invoices, orders, or purchase orders paid during the covered period with corresponding receipts or account statements.

  • Covered worker protection expenditures: a copy of invoices, orders, or purchase orders paid during the covered period with corresponding receipts or account statements. Documentation will need to be provided that proves that the expenditures were used by the borrower to comply with applicable COVID-19 guidance during the covered period.

Additional documentation for second PPP loans

If you apply for forgiveness for your second PPP loan, you will need to provide documentation proving a 25% reduction in quarterly or annual gross receipts.

  • If you are using quarterly gross receipts, you will need to provide financial and bank statements for the two selected quarters.
  • If you are using annual gross receipts, you will need to provide tax returns for both years. These tax returns do not necessarily need to be filed, but they need to be complete and accurately prepared.

More PPP resources

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This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. Bench assumes no liability for actions taken in reliance upon the information contained herein.

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