The U.S. Small Business Administration has released a 1-page form that simplifies the application for forgiveness of Paycheck Protection Program loans. It also includes newly revised forms that comply with the current stimulus law.
Congress approved the COVID-19 relief package in the month of March, which included $284 billion of financing to small businesses in need of loans. The funds were used to offset the economic impact of the coronavirus epidemic. The legislation required that the SBA provide simplified forms within 24 hours of the legislation’s signing into law. This is to facilitate the application for forgiveness. It also included conditions that would encourage community banks to lend more particularly to minority-owned businesses who had a difficult time getting loans last year.
“The Small Business Administration met the requirement to issue the one page form for PPP loan forgiveness within 24 hours 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 issued new forms.”
Terms for forgiveness for the first draw of PPP loans
Ppp Loan Forgiveness Tax Implications – For borrowers who are eligible First Draw PPP loans are qualified to be forgiven. This happens when the loan payment is made within an 8– to 24-week timeframe.
- It’s the same for pay and benefits for employees.
- The proceeds of the loan can be used to cover expenses for payroll or other eligible expenses.
- Minimum 60% of proceeds go to the cost of payroll
Second Draw PPP Terms of Loan Forgiveness
Second Draw PPP loans granted to borrowers who meet the criteria are eligible for complete loan forgiveness, if within the 8to 24-week time period after loan disbursement:
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in the exactly the same manner.
- The loan proceeds could be used to cover the cost of payroll as well as other expenses that are eligible.
- A minimum of 60% of the profits are used to pay for payroll expenses
- How to request loan forgiveness and when
When all of the loan proceeds have been used, a borrower can apply for forgiveness. Borrowers are able to apply for forgiveness at any time prior until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 month of the expiration date of the loan are eligible to receive the loan payment from their PPP lender.