The U.S. Small Business Administration has released a single-page form designed to make it easier for applicants to complete the application process for the forgiveness of Paycheck Protection Program loans, as well as newly revised and updated forms to conform to the requirements of the most recent stimulus legislation.
The COVID-19 aid package Congress passed last month revived the PPP with $284 billion in funding for small businesses seeking forgiveness loans to help them to deal with the effects of economic collapse from the coronavirus pandemic. It also included a requirement that the SBA to issue streamlined forms within the first 24 hours after the legislation was adopted to make the process of applying for forgiveness. The legislation also contained conditions that aim to increase the number of loans from community banks, specifically for minority-owned companies that had trouble getting loans in the past.
“The Small Business Administration met the requirements to release the single-page form for PPP loan forgiveness by 24 days after the date of enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars who is a partner of Thomas, Zollars & Lynch CPAs, on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also released new forms that were updated.”
Forgiveness terms in the first draw of PPP loans
Loan Forgiveness Tax – First Draw PPP loans made to eligible borrowers qualify for full loan forgiveness if within the 8-to 24-week period after loan disbursement:
- The levels of compensation and employee pay are maintained
- The loan funds are used on payroll and other expenses that are eligible and
- At least 60% of the proceeds are used to pay for payroll expenses
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 period.
- Employee and compensation levels are maintained in the same manner as is required for the First Draw PPP loan
- The proceeds of the loan can be used to cover the cost of payroll as well as other expenses that are eligible.
- Minimum 60% of funds go to expenses for payroll
- How do I request loan forgiveness and when to apply
When all of the loan funds have been utilized, a borrower can apply for forgiveness. The borrower can apply for forgiveness at any time up to the date at which the loan matures. 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 borrowers must make payment to their PPP lender.
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