Ppp Loan Forgiveness Tax Guidance

Ppp Loan Forgiveness Tax Guidance

The U.S. Small Business Administration has issued a one-page form that makes it easier to apply for forgiveness of Paycheck Protection Program loans. The form also contains newly updated forms to comply with the current stimulus legislation. 

Congress approved the COVID-19 relief package in the month of March that included $284 billion of financing for small-scale businesses who needed loans. The funds were used to offset the economic impact of the coronavirus epidemic. The law required that the SBA provide simplified forms within 24 hours of the signing into law. This is to facilitate the application for forgiveness. It also included conditions that would encourage community banks to make more loans, especially to minority-owned businesses who were unable to obtain loans last year.

Ppp Loan Forgiveness Tax Guidance

“The Small Business Administration met the requirement to issue the one page form for loan forgiveness under the PPP within 24 days of the date of the enactment of 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 more updated forms.”

Forgiveness terms for the first draw of PPP loans

Ppp Loan Forgiveness Tax Guidance – For those who qualify, First Draw PPP loans are suitable to be forgiven. This is if the loan disbursement occurs within an 8 to 24-week timeframe.

  • The levels of compensation and employee pay are ensured
  • The loan proceeds are spent on payroll expenses and other eligible expenses; and
  • At least 60% of the proceeds are used to pay for payroll expenses

Second Draw PPP Terms of Loan Forgiveness

Second Draw PPP loans granted to borrowers who are eligible can be granted full loan forgiveness if during the 8to 24-week duration following the loan’s disbursement

  • The levels of compensation and employee pay are maintained in the same way as is required for the First Draw PPP loan
  • The loan funds can be used to cover the cost of payroll as well as other expenses that are eligible.
  • A minimum of 60% of the funds go to payroll costs
  • How to apply for loan forgiveness , and the time to apply

Once all of the loan proceeds have been used The borrower may apply for forgiveness. Borrowers can request forgiveness at any point up to the date at which the loan matures. If borrowers do not apply for forgiveness within 10 month of the expiration date of the loan will be able to receive payment from their PPP lender.

Download Ppp Loan Forgiveness Tax Guidance

Gallery of Ppp Loan Forgiveness Tax Guidance


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