The U.S. Small Business Administration released a one-page form that aims to simplify the process of applying to forgive Paycheck Protection Program loans, along with newly updated and revised forms that meet the requirements of the latest stimulus legislation.
The COVID-19 relief plan that Congress approved last month renewed the PPP with $284 billion of funding for small businesses seeking forgiven loans to help deal with the financial fallout from the coronavirus outbreak. It also included a requirement that the SBA to issue simplified forms within the first 24 hours of the legislation being signed into law to simplify the application process for forgiveness. The legislation also contained conditions that aim to increase the number of bank loans by community banks, particularly for minority-owned businesses who had trouble getting loans in the past.
“The Small Business Administration met the requirement of releasing the one-page form for PPP loan forgiveness by 24 days after 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 released new forms.”
First Draw PPP Terms of loan forgiveness
Loan Forgiven Tax Form – First Draw PPP loans granted to borrowers who are eligible can be granted full loan forgiveness if during the 8- to 24 week period that follows the disbursement of loan:
- The same goes for the compensation and employees.
- The proceeds of the loan can be used to pay for payroll costs or other eligible expenses.
- At least 60% of the profits are used for the cost of payroll
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans to eligible customers are qualified for loan forgiveness when the loan is repaid within an 8– to 24 week time frame.
- Pay and worker levels are maintained in the same way as is required for the First Draw PPP loan
- The loan proceeds are used on payroll expenses and other eligible expenses; and
- Minimum 60% of profits go towards expenses for payroll
- How to apply for loan forgiveness and when to apply
A borrower can apply for forgiveness after all loan proceeds to which the borrower has applied for forgiveness have been utilized. Borrowers can request forgiveness at any point up to the loan’s maturity date. If borrowers do not apply for forgiveness within 10 month after the date they will be able to repay the loan will be able to receive payment from their PPP lender.