How to Get PPP Loan Forgiveness: Deadlines, Forms, and Documentation

To get PPP loan forgiveness, you need to have spent the loan on eligible payroll and operating costs during your covered period, kept records that prove it, maintained your workforce and wages, and filed a forgiveness application before your deadline. The program stopped issuing new loans on May 31, 2021, but the SBA still processes forgiveness applications from existing borrowers.¹ If your loan is still outstanding, the window is closing: you have up to five years from the date the SBA issued your loan number to apply, and for many Second Draw loans that outer deadline lands in 2026.

Know Your Deadlines First

Two deadlines control your situation, and one of them costs you money before it costs you forgiveness.

The first is the 10-month rule. If you don’t apply for forgiveness within 10 months after the last day of your covered period, your loan payments stop being deferred and you have to start repaying your lender.² Missing this window doesn’t disqualify you from forgiveness, but you’ll be making payments in the meantime.

The second is the hard outer limit: five years from the date the SBA issued your loan number.¹ For First Draw loans issued in early 2020, that window is closed or nearly closed. For Second Draw loans issued in the first half of 2021, you likely have until sometime in 2026. Check the disbursement date on your loan documents and count forward. Once that date passes, whatever balance remains is simply a loan you owe.

Spend the Loan on Eligible Costs

At least 60 percent of the loan has to go toward payroll costs; up to 40 percent can go to other eligible expenses.³ Falling below 60 percent on payroll doesn’t kill forgiveness; it reduces the forgivable amount proportionally.

The Covered Period

Eligible spending has to happen inside your covered period, which is either 8 or 24 weeks (up to 168 days) starting on the disbursement date. Borrowers who received a loan before June 5, 2020 can choose either window; everyone else uses 24 weeks.⁴ If you run payroll biweekly or more often, you can instead start the clock on the first day of the first pay period after disbursement. The 24-week option gives most borrowers an easier time hitting the 60 percent payroll threshold.

Payroll Costs

Payroll costs include gross wages, salaries, commissions, tips, and employer-paid benefits such as health insurance premiums, retirement plan contributions, and state or local payroll taxes. Compensation above $100,000 per employee on an annualized basis is excluded.⁵

Owner-employees, self-employed individuals, and general partners have their own cap. Using the 24-week covered period, the maximum forgivable amount for your own compensation is $20,833 across all businesses in which you hold an ownership stake. Using the 8-week period, the cap is $15,385.⁶ Owner health insurance and retirement contributions are excluded from owner payroll costs and don’t count toward the cap.

Non-Payroll Costs

The original three non-payroll categories are rent or lease payments, utilities, and interest on business mortgage debt, each of which must have been in place before February 15, 2020.³

The Economic Aid Act of 2021 added more. Also eligible: payments for business software or cloud computing used for operations, payroll processing, HR, sales, billing, or accounting; and worker-protection spending on personal protective equipment, ventilation improvements, sneeze guards, and similar modifications made to comply with COVID-19 guidance from OSHA, the CDC, or state and local authorities.⁴ These expanded categories apply only to borrowers whose lenders had not yet received a forgiveness payment from the SBA as of December 27, 2020.

Maintain Headcount and Wages

Full forgiveness requires keeping your full-time equivalent (FTE) headcount at levels comparable to your pre-pandemic baseline. A drop in FTE count reduces your forgiveness proportionally. Cutting any individual employee’s salary or hourly wage by more than 25 percent, for employees who earned less than $100,000 annually, also reduces your forgiveness.³

Several safe harbors let you exclude FTE reductions from the calculation if you can document them:

ul>

You made a good-faith written offer to rehire an employee who was on staff as of February 15, 2020, and the employee turned it down.

You couldn’t hire a similarly qualified person for an unfilled position by December 31, 2020.

You reduced wages during the covered period but restored them to at least the February 15, 2020 level by December 31, 2020.

If an employee rejects a rehire offer, you have to notify your state unemployment insurance office within 30 days.⁶ Keep the written offer, the rejection, and your records of trying to find a replacement.

Pick the Right Application Form

The SBA offers three forgiveness applications. Which one you use depends on loan size and whether your staffing or wages changed.

Form 3508S is for borrowers with a PPP loan of $150,000 or less. It’s a simplified certification with no detailed calculations or FTE documentation; you attest that you met the requirements and provide basic loan information.⁷
Form 3508EZ is for borrowers who didn’t reduce headcount or wages and don’t have a complicated ownership structure. It requires more detail than the 3508S but skips the FTE reduction calculations.
Form 3508 is the full application with worksheets tracking individual hours, compensation, and FTE equivalency. Required for larger loans, or for businesses that reduced staffing or wages and can’t use a simplified form.

All three forms are on the SBA and Treasury websites.⁵ Each form asks for your SBA loan number, your lender’s loan number, and your exact disbursement date.

Pull Together the Documentation

Every dollar you claim has to have a paper trail. What you need depends on whether the spending was payroll or non-payroll.

Payroll Records

Gather IRS Form 941 (quarterly federal tax returns), state wage reporting documents, and unemployment insurance filings. Add bank statements or third-party payroll reports showing the money actually reached employees during the covered period. If you’re self-employed, your 2019 or 2020 Schedule C and bank records documenting owner compensation replace the employer filings.

Non-Payroll Records

For rent and lease payments, keep the lease plus receipts, canceled checks, or landlord account statements from both February 2020 and your covered period. Mortgage interest needs an amortization schedule and canceled checks or lender statements covering the same dates. Utilities need invoices from February 2020 and the covered period, plus proof of payment.⁴ The February 2020 documentation is what proves the obligation existed before the pandemic. Without it, the expense doesn’t qualify.

Even if you’re using Form 3508S and won’t submit all of this upfront, gather it and keep it. The SBA can review your loan after forgiveness is granted.

Submit the Application

As of March 2024, all borrowers regardless of loan size can use the SBA’s Direct Forgiveness Portal at directforgiveness.sba.gov to file electronically.¹ You’ll create an account with a username and password.⁸ Some lenders accept applications through their own portals, but the SBA’s direct option is the most universally available.

You’ll enter your form data and upload PDFs of the supporting documents. Check the entries for clerical errors before submitting. The system issues a confirmation number. There is no fee to file through official channels.

What Happens After You File

Your lender has 60 days from receiving a complete application to make a decision and send it to the SBA. The SBA then has up to 90 days to conduct its own review and remit the forgiveness payment to your lender.⁴ Straightforward applications, especially Form 3508S filings, often move faster than that combined 150-day maximum.

If the SBA grants full forgiveness, it pays your lender the outstanding principal plus accrued interest, and the debt is retired. If only partial forgiveness is granted, the unforgiven balance becomes a standard loan at a fixed 1 percent interest rate. Loans issued after June 5, 2020 have a five-year maturity; loans issued before that date have a two-year maturity, though borrower and lender can agree to extend to five years.⁹

Appealing a Denial

If the SBA issues a final loan review decision denying forgiveness or finding you ineligible for the loan amount, you can appeal to the SBA’s Office of Hearings and Appeals (OHA). You have 30 calendar days from receiving the final decision to file.¹⁰

Appeals are filed electronically at appeals.sba.gov and must include a copy of the final SBA decision, a detailed explanation of why the decision is wrong with supporting facts and legal arguments, and contact information for you or your attorney.

Filing doesn’t automatically extend loan deferment. Give your lender a copy of the appeal to keep payments deferred while OHA considers your case.¹⁰ An OHA judge reviews the administrative record; there is no trial. If OHA dismisses your appeal or rules against you, you have 10 days to file a petition for reconsideration and must show an error of fact or law.¹¹

One boundary worth knowing: OHA only has jurisdiction over final SBA decisions. If your lender denied forgiveness and it never reached the SBA, your dispute is with the lender.

Federal Tax Treatment

Forgiven PPP loan amounts aren’t taxable income at the federal level. The IRS initially took the position that expenses paid with forgiven funds couldn’t be deducted, but Congress overruled that in the Consolidated Appropriations Act of 2021, which explicitly provides that no deduction can be denied and no tax attribute reduced because of PPP forgiveness.¹²

So the forgiven loan isn’t income, and the wages, rent, and utilities you paid with those funds are still deductible business expenses. Most states followed the federal treatment; a small number diverged. Check with a tax professional if your state imposed different rules.

Keep Your Records After Forgiveness

Forgiveness isn’t the end. The SBA can review your loan afterward, and Congress extended the statute of limitations for both criminal charges and civil enforcement actions related to PPP fraud to 10 years from the date the offense was committed.¹³ Investigators can pursue cases well into the late 2020s and early 2030s for loans originated in 2020 and 2021.

The formal record-retention requirement for borrowers is six years for loans over $150,000 and shorter for smaller loans, but given the 10-year enforcement window, holding every forgiveness-related document for a full decade is the safer approach. Keep the application, all supporting documentation, payroll records, bank statements, lease agreements, and any correspondence with your lender or the SBA.

1
U.S. Small Business Administration. PPP Loan Forgiveness
2
Treasury. Paycheck Protection Program Loan Forgiveness
3
Office of the Law Revision Counsel. 15 U.S. Code 636m – Loan Forgiveness
4
Department of the Treasury / Small Business Administration. PPP Loan Forgiveness Requirements and Loan Review Procedures as Amended by Economic Aid Act
5
U.S. Department of the Treasury. Paycheck Protection Program
6
Treasury. Frequently Asked Questions on PPP Loan Forgiveness
7
U.S. Small Business Administration. PPP 3508S Loan Forgiveness Application and Instructions
8
SBA PPP Forgiveness. SBA PPP Direct Forgiveness Portal
9
U.S. Small Business Administration. First Draw PPP Loan
10
U.S. Small Business Administration. PPP Appeals
11
Small Business Administration. OHA Appeals Platform
12
Taxpayer Advocate Service. Paycheck Protection Plan Loan Forgiveness and Deductibility of Associated Expenses
13
Federal Register. Business Loan Program Temporary Changes; Paycheck Protection Program-Extension of Lender Records Retention Requirements