Is Loan Forgiveness Taxable

Is Loan Forgiveness Taxable

The U.S. Small Business Administration has issued a one-page form that simplifies the application for forgiveness of Paycheck Protection Program loans. The form is also updated with new forms to comply with the latest stimulus law. 

The COVID-19 aid package Congress passed last month revived the PPP with $284 billion of funding for small businesses seeking forgiven loans to help to deal with the effects of economic collapse of the coronavirus epidemic. The law requires that the SBA provide simplified forms within the first 24 hours of the signing into law. This is to simplify the process of applying for forgiveness. It also included conditions that encourage community banks to make more loans particularly to minority-owned businesses who had a difficult time getting loans in the past.

Is Loan Forgiveness Taxable

“The Small Business Administration met the requirement of releasing the single-page form for PPP loan forgiveness within 24 days of the date of enactment the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also published new forms that were updated.”

First Draw PPP Conditions for loan forgiveness

Is Loan Forgiveness Taxable – First Draw PPP loans given to borrowers who are eligible can be granted full loan forgiveness if within the 8-to 24-week covered period following the loan’s disbursement

  • Pay and worker levels are kept at a constant level.
  • The loan proceeds are used on payroll and other eligible expenses; and
  • Minimum 60% of proceeds go to payroll costs

Second Draw PPP Loan Forgiveness The terms

Second Draw PPP loans to qualified customers are eligible for loan forgiveness when the loan is repaid within an 8to 24 week time frame.

  • Employee and compensation levels are maintained in the same manner in accordance with the First Draw PPP loan
  • The loan funds could be used to pay for payroll costs or other expenses that are eligible.
  • At least 60% of the proceeds are used to pay for payroll expenses
  • How do I apply for loan forgiveness , and the time to apply

A borrower can apply for forgiveness once all loan proceeds to which the borrower is requesting forgiveness have been used. Borrowers can request forgiveness at any time until the loan’s maturity date. Borrowers who don’t request forgiveness within 10 months of the end date of the loan are able to receive the loan payment from their PPP lender.

Download Is Loan Forgiveness Taxable

Gallery of Is Loan Forgiveness Taxable


Leave a Reply

Your email address will not be published.