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On January 19, 2021, the U.S. Small Business Administration (SBA) and Treasury released guidance for how Paycheck Protection Program (PPP) borrowers should calculate revenue reduction and maximum loan amounts for second-draw PPP loans and published updated PPP loan forgiveness guidance and forms. The following blog post discusses each of these updates and highlights what your business needs to know.

Second-Draw PPP Loan Calculations:

The guidance for second-draw PPP loan calculations and the documents borrowers must provide to support each set of calculations came in the form of an 18-page document. The guidance is structured in the form of 24 questions and answers addressing a variety of situations. Here is a snapshot of some of the items the new guidance covers:

  • The guidance addresses the relationship between calculating gross receipts and the accounting method the borrower uses, stating that in the case of a for-profit business, gross receipts are defined as generally all revenue in whatever form received or accrued, which is determined in accordance with the borrower’s accounting method (e.g., accrual or cash) used for federal income tax return purposes. Similarly, gross receipts for nonprofit organizations will be defined by section 6033 of the Internal Revenue Code.
  • Eight of the 24 questions deal with how to determine if a PPP borrower experienced the 25% decline in gross receipts required to apply for a second-draw PPP loan. Guidance related to this also includes:
    • Documentation needed to show a 25% reduction in gross receipts, including internal financial statements, bank statements or tax returns.
    • How to demonstrate a gross receipts reduction if you are using your company’s annual income tax returns.
  • The remaining 16 questions cover how a PPP borrower can calculate the maximum amount they can receive for a second-draw PPP loan. Guidance related to this also includes:
    • How the following types of businesses should calculate their second-draw PPP loan maximums: self-employed (with or without employees), partnerships, S corporations, C corporations, nonprofit organizations, religious institutions, veterans organizations, tribal businesses and LLC owners.
    • Documents required to substantiate payroll costs used to determine your maximum second-draw PPP loan amount.
    • Calculation considerations for businesses not in operation a full year prior to February 15, 2020.

Updated PPP Loan Forgiveness Applications and Rules:

New guidance on the PPP loan forgiveness application includes the release of four new / updated forms:

  • Form 3508S – a one-page application for borrowers that received a PPP loan of $150,000 or less. No supporting documentation is required for this form, but borrowers are mandated to maintain payroll, non-payroll and other documentation that could be requested in a future SBA loan review or audit.
  • Form 3508EZ – PPP loan forgiveness application for loans over $150,000 for which the borrower was either a) self-employed with no employees, b) did not reduce salaries or wages of employees by more than 25% and didn’t reduce the number of employees or paid hours, or c) did not reduce salaries or wages of employees by more than 25% and were unable to operate at the same business level as before February 15, 2020 due to complying with certain health and safety requirements.
  • Form 3508 – PPP loan forgiveness application for borrowers who do not qualify to use Form 3508EZ or 3508S.
  • Form 3508D – certain individuals are required to use this form to disclose controlling interest in an entity applying for a PPP loan.

In addition to the PPP loan forgiveness application forms, the SBA also released an interim final rule (IFR) that consolidated prior PPP loan forgiveness rules and changes made by The Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, P.L. 116-260. It is important to note that both the four loan forgiveness application forms and the IFR apply to first- and second-draw PPP loans.

Additional PPP Guidance:

In addition to the guidance on PPP loan calculations and the forgiveness application, the SBA has provided further guidance on the following key areas of the PPP:

Have Additional Questions?

We realize that PPP loan calculations and forgiveness applications can be complex. As new guidance is continually released, it can be hard for small businesses to stay on top of these changes. The Moore Colson team is available to help your business navigate the PPP. We can assist with applications for first- or second-draw PPP loans and PPP loan forgiveness calculations. Contact us for more information.

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Bert Mills, CPA, is the Managing Partner at Moore Colson. In his role, Bert sets the vision and mission of the Firm and works closely with the Firm’s leadership to drive and implement strategies. 


Andy Starnes, CPA, is a Partner and Tax Services Practice Leader Moore Colson. Andy’s specialties include corporate tax compliance and planning, business consulting and multi-generational planning with a focus on the construction, professional services and staffing industries.

Moore Colson CPAs and Advisors Chris Arnone Audit Practice Leader

Chris Arnone, CPA, is a Partner and Business Assurance Practice Leader at Moore Colson. Chris has over 20 years of experience providing audit, accounting and consulting services for companies in the transportation, manufacturing, distribution, staffing, private equity and venture capital industries.



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