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PPP Loan Forgiveness UPDATE - September 16, 2020

Updated: Jan 9, 2021

After much confusion, it's now clear that self-employed individuals who have no employees, and therefore no actual payroll expenses, can qualify for full PPP loan forgiveness by simply paying themselves - now called Owner Compensation Replacement. 

The amount that can be forgiven is based on your 2019 net self-employment income and can be up to 100% of the loan amount. The Owner Compensation Replacement will be considered as income, so it's not very compatible with unemployment benefits or Pandemic Unemployment Assistance (PUA).

An interim final rule issued by the SBA on August 24th allows for the self-employed to use up to 2.5 months' worth of their loan proceeds over a 24-week covered period on owner compensation replacement.

If you do have these expenses, the good news is you can count costs that were either paid during the covered period or incurred during the covered period and paid before the next billing cycle. Remember, you have to have claimed or been able to claim these expenses on your 2019 Schedule C (SBA Interim Final Rule from April 14, 2020)


The covered period of PPP loans was extended, so there is no need to rush the loan forgiveness application process. According to SBA guidelines, borrowers have up to 10 months following the end of their chosen coverage period to submit their PPP loan forgiveness application. Loan payments are deferred until after the borrower has submitted for forgiveness and the SBA has made a decision. 

Most lenders are not ready to process forgiveness applications and are still in the process of developing their own online forgiveness application process, so you may not need to fill out the SBA's version of the form. Also, keep in mind that Congress is still discussing automatic forgiveness for loans under $150,000. If you are able - hold off until Congress has made a decision.


1. Make sure all of your documents have dates. For non-payroll expenses such as health insurance, rent, mortgage, utilities and others, save and submit copies of these costs with the dates as evidence that you incurred these expenses during the covered period.

2. Be sure to make photocopies of the origination of the loan as well as any documentation you sent to get the loan approved at the front end.

3. You must also keep these documents "for six years after the date the loan is forgiven or repaid in full, and permit authorized representatives of SBA, including representatives of its Office of Inspector General, to access such files upon request."

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