The U.S. Small Business Administration has released a 1-page form that simplifies the application for the cancellation of Paycheck Protection Program loans. It also includes newly revised forms to comply with the latest stimulus legislation.
Congress approved the COVID-19 relief package last month that provided $284 billion of funding for small-scale businesses who needed loans. The money was intended to offset the economic impact of the coronavirus outbreak. It also included a requirement that the SBA to issue simplified forms within the first 24 hours after the legislation was approved by the lawmaker to streamline the process of applying for forgiveness. It also included conditions designed to facilitate more bank loans by community banks, specifically for minority-owned businesses that were unable to obtain loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and said that the Small Business Administration fulfilled the obligation to issue the one-page PPP form loan forgiveness within 24 days of the date of enactment in the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also published new forms that were updated.”
Forgiveness terms in the initial draw of PPP loans
Do You Have To Pay Taxes On Loan Forgiveness – For eligible borrowers First Draw PPP loans are eligible for loan forgiveness. This applies when the loan is disbursed within an 8– to 24-week period.
- Pay and worker levels are ensured
- The proceeds from the loan may be used to cover the cost of payroll as well as other eligible expenses.
- At least 60% of the proceeds are used for the cost of payroll
Second Draw PPP Conditions for loan forgiveness
Second Draw PPP loans made to eligible borrowers qualify for complete loan forgiveness, if within the 8to 24 week duration following the loan’s disbursement
- Employee and compensation levels are kept in the same way as required for the First Draw PPP loan
- The loan proceeds can be used to cover payroll costs or other eligible expenses.
- At least 60% of profits go towards the cost of payroll
- How to request loan forgiveness and when
When all of the loan’s proceeds have been used, a borrower can apply to be forgiven. Borrowers can apply for forgiveness any time up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 months after the end of the covered period and the loan is not renewed, PPP loan payments are no longer deferred, and the borrower will be required to make payment to their PPP lender.