The U.S. Small Business Administration released a one-page form aimed at simplifying the application process to forgive Paycheck Protection Program loans, as well as newly updated and revised forms that 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 of financing for small-scale businesses looking for forgiven loans to help deal with the financial fallout of the coronavirus epidemic. The law required that the SBA release simplified forms within 24 hours after the bill’s passage into law. This was to make it easier to apply for forgiveness. Additionally, it included conditions that encourage community banks to make more loans particularly to minority-owned businesses who were unable to obtain loans last year.
“The Small Business Administration met the requirements to release the single-page form for the forgiveness of PPP loans within 24 hours of the date of enactment the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner at Thomas, Zollars & Lynch CPAs, on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also issued new forms.”
Forgiveness terms for the initial draw of PPP loans
Loan Forgiveness Taxable Income – For eligible borrowers, First Draw PPP loans can be qualified to forgive loans. This is when the loan is disbursed within an 8– to 24-week period.
- Pay and worker levels are kept at a constant level.
- The loan proceeds are spent on payroll expenses and other expenses that are eligible and
- At least 60% of profits go towards payroll costs
Second Draw PPP Loan Forgiveness The terms
Second Draw PPP loans to eligible borrowers are qualified for loan forgiveness when the loan is repaid within an 8– to 24-week period.
- The levels of compensation and employee pay are maintained in the same manner as is required for the First Draw PPP loan
- The loan proceeds could be used to pay expenses for payroll or other expenses that are eligible.
- A minimum of 60% of the profits are used for the cost of payroll
- When and how do I apply for loan forgiveness?
A borrower can apply for forgiveness only after the loan’s proceeds for which the borrower has applied for forgiveness have been utilized. Borrowers are able to apply for forgiveness at any time prior until the date of maturity of the loan. Borrowers who don’t request forgiveness within 10 months after the date they will be able to repay the loan are able to receive the loan payment from their PPP lender.