The U.S. Small Business Administration released a one-page form that aims to simplify the process of applying for the forgiveness of Paycheck Protection Program loans, along with newly revised and updated forms to meet the requirements of the most recent stimulus legislation.
The COVID-19 relief package that Congress approved last month renewed the PPP with $284 billion of funding for small businesses seeking forgiven loans to help deal with the financial fallout of the coronavirus epidemic. The package also mandated the SBA to issue streamlined forms within the first 24 hours of the legislation being adopted to make the procedure of applying for forgiveness, along with conditions meant to encourage more loans from community banks, particularly for minority-owned companies that struggled to get loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs said 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 the enactment of the Consolidated Appropriations Act, 20,21. The article was posted on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also published new forms that were updated.”
Terms for forgiveness for the initial draw of PPP loans
Ppp Loan Forgiveness Tax Treatment – First Draw PPP loans granted to borrowers who meet the criteria are eligible for full loan forgiveness if within the 8-to 24-week period after the disbursement of loan:
- The levels of compensation and employee pay are kept at a constant level.
- The loan funds are used on payroll expenses and other eligible expenses; and
- At least 60% of the proceeds are spent on payroll costs
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans made to borrowers who meet the criteria are eligible for total loan forgiveness if they do so during the 8to 24 week time period after the loan’s disbursement
- The First Draw PPP loan requires that the employee and the compensation levels are maintained in the exact same way.
- The loan proceeds are used on payroll costs and other expenses that are eligible and
- Minimum 60% of profits go towards expenses for payroll
- What is the best time to apply for loan forgiveness?
After all loan funds have been utilized the borrower is eligible to be forgiven. Borrowers may apply for forgiveness at any time until the date of maturity. If they do not file for forgiveness within 10 years of the last day of the period covered the PPP loans are no longer deferred and the borrower will be required to make loan payments to their PPP lender.