The U.S. Small Business Administration has released a form of one page which makes it simpler to request the cancellation of Paycheck Protection Program loans. The form also contains newly updated forms that are in line with the latest stimulus legislation.
The COVID-19 relief plan that Congress passed last month revived the PPP with $284 billion in 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 issue simplified forms within the first 24 hours of the legislation’s signing into law. This was to simplify the process of applying for forgiveness. It also included conditions that would encourage community banks to make more loans particularly to minority-owned businesses who were unable to obtain loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs wrote that the Small Business Administration fulfilled the obligation to issue the PPP form, which is one page long, for loan forgiveness within the first 24 hours from the date of enactment under the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released new forms that were updated.”
Forgiveness terms in the initial draw of PPP loans
Ppp Loan Forgiveness Tax Deduction – For eligible borrowers, First Draw PPP loans can be qualified to forgive loans. This happens if the loan disbursement occurs within an 8 to 24-week timeframe.
- Employee and compensation levels are maintained
- The proceeds of the loan can be used to pay for payroll costs or other expenses that are eligible.
- A minimum of 60% of proceeds are used for the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans given to borrowers who meet the criteria are eligible for full loan forgiveness if during the 8to 24 week covered period following the loan’s disbursement
- The First Draw PPP loan requires that the compensation and employee levels be maintained in the exact same way.
- The loan funds are used on payroll costs as well as other eligible expenses and
- A minimum of 60% of the proceeds go to payroll costs
- How do I request loan forgiveness and when to apply
A borrower may apply for forgiveness after all loan proceeds to which the borrower wants forgiveness have been used. Borrowers may apply for forgiveness at any point up to the date of maturity. If borrowers do not apply for forgiveness within 10 months after the end of the covered period, then PPP loan payments can not deferred any longer, and borrowers must make monthly payments to their PPP lender.