The U.S. Small Business Administration issued a one-page application form aimed at simplifying the process of applying for the forgiveness of Paycheck Protection Program loans, along with newly updated and revised forms that meet the requirements of the most recent stimulus legislation.
The COVID-19 relief plan that Congress adopted last month revived the PPP with $284 billion of financing for small-scale businesses looking for forgiveness loans to help them deal with the financial fallout of the coronavirus epidemic. The law required that the SBA provide simplified forms within 24 hours of the signing into law. This is to facilitate the application for forgiveness. It also included conditions that would encourage community banks to make more loans particularly to minority-owned businesses who had a difficult time getting loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs said that the Small Business Administration fulfilled the requirement to issue the one-page PPP form loan forgiveness within 24 days of the date of enactment under the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released the updated forms.”
Forgiveness terms for the initial draw of PPP loans
How To Report Ppp Loan Forgiveness On Tax Return – For eligible borrowers, First Draw PPP loans are qualified for loan forgiveness. This happens when the loan payment is made within an 8– to 24-week period.
- This is also true for compensation and employees.
- The loan proceeds are spent on payroll expenses and other expenses that are eligible and
- At least 60% of the profits are used to pay for payroll expenses
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans given to eligible borrowers qualify for complete loan forgiveness, if within the 8to 24-week time period after loan payment:
- Employee and compensation levels are maintained in the same manner as required for the First Draw PPP loan
- The loan proceeds are spent on payroll expenses and other eligible expenses; and
- A minimum of 60% of proceeds are used to pay for payroll expenses
- How and when to apply for loan forgiveness
The borrower is eligible for forgiveness only after all loan proceeds for which the borrower wants forgiveness have been used. The borrower can apply for forgiveness at any point up to the date at which the loan matures. If they do not file for forgiveness within 10 months of the last day of the time period that was covered the PPP loan payments are no longer deferred, and borrowers will begin making payment to their PPP lender.