The U.S. Small Business Administration has released a 1-page form that simplifies the application for the cancellation of Paycheck Protection Program loans. The form is also updated with new forms that are in line with the latest stimulus legislation.
The COVID-19 relief package that Congress adopted 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 from the coronavirus pandemic. The legislation required that the SBA release simplified forms within the first 24 hours after the bill’s passage into law. This was to make it easier to apply for forgiveness. It also included conditions that encourage community banks to make more loans, especially to minority-owned businesses who had a difficult time getting loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and stated that the Small Business Administration fulfilled the requirement to publish the one-page form for PPP loan forgiveness within the first 24 hours from the date of enactment in the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released more updated forms.”
Forgiveness terms for the initial draw of PPP loans
Maryland Student Loan Forgiveness Tax Credit – For those who qualify, First Draw PPP loans can be eligible to forgive loans. This applies when the loan is disbursed within an 8 to 24-week period.
- The levels of compensation and employee pay are maintained
- The loan proceeds are spent on payroll costs and other eligible expenses; and
- A minimum of 60% of profits are used to pay for payroll expenses
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans granted to eligible borrowers qualify for full loan forgiveness if during the 8– to 24-week time period after the loan’s disbursement
- Pay and worker levels are maintained in the same way as required for the First Draw PPP loan
- The proceeds of the loan could be used to pay payroll costs or other eligible expenses.
- At least 60% of funds go to the cost of payroll
- How and when to apply for loan forgiveness?
When all of the loan’s proceeds have been used the borrower is eligible to be forgiven. Borrowers may apply for forgiveness at any time up to the date at which the loan matures. Borrowers who do not request forgiveness within 10 months after the date they will be able to repay the loan are able to receive loan payments from their PPP lender.