The U.S. Small Business Administration has issued a one-page form which makes it simpler to request the cancellation of Paycheck Protection Program loans. The form also contains newly updated forms to comply with the most recent stimulus law.
Congress approved the COVID-19 relief package in the month of March and included $284 billion of financing to small businesses that needed loans. The funds were used to reduce the economic burden of the coronavirus pandemic. The package also mandated the SBA to issue streamlined forms within the first 24 hours after the legislation was signed into law to simplify the procedure of applying for forgiveness. It also included conditions that aim to increase the number of bank loans by community banks, especially for minority-owned businesses who were unable to obtain loans last year.
“The Small Business Administration met the requirement of releasing the one page form for loan forgiveness under the PPP within 24 hours of the date of the enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner at Thomas, Zollars & Lynch CPAs on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also issued new forms that were updated.”
First Draw PPP Conditions for loan forgiveness
Are Forgivable Loans Taxable – First Draw PPP loans granted to borrowers who meet the criteria are eligible for full loan forgiveness if within the 8 to 24 week period that follows the disbursement of loan:
- It’s the same for compensation and employees.
- The proceeds of the loan can be used to cover payroll costs or other expenses that are eligible.
- At least 60% of proceeds go to the cost of payroll
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans made to borrowers who meet the criteria are eligible for complete loan forgiveness, if within the 8– to 24-week covered period following the loan’s disbursement
- The First Draw PPP loan requires that the employee and compensation levels be maintained in the identical manner.
- The loan proceeds are used on payroll as well as other eligible expenses and
- At least 60% of funds go to the cost of payroll
- How to apply for loan forgiveness and the time to apply
A borrower may apply for forgiveness only after all loan proceeds for which the borrower is requesting forgiveness have been utilized. Borrowers may apply for forgiveness at any time up to the date of maturity. If the borrower does not apply for forgiveness within 10 months after the last day of the covered period the PPP loan payments are not deferred any longer, and borrowers must make loan payments to their PPP lender.