Ppp Loan Forgiveness Taxable Income

Ppp Loan Forgiveness Taxable Income

The U.S. Small Business Administration has released a single-page form that aims to simplify the process of applying for the forgiveness of Paycheck Protection Program loans, together with revised and updated forms to meet the requirements of the most recent stimulus legislation. 

Congress approved the COVID-19 relief plan last month and included $284 billion of financing to small businesses in need of loans. The funds were used to reduce the economic burden of the coronavirus pandemic. It also included a requirement that the SBA to issue simplified forms within 24 hours after the legislation was approved by the lawmaker to streamline the procedure of applying for forgiveness. It also included conditions meant to encourage more bank loans by community banks, especially for minority-owned businesses who had trouble getting loans last year.

Ppp Loan Forgiveness Taxable Income

“The Small Business Administration met the requirements to release the one page form for the forgiveness of PPP loans within 24 hours of the date of enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner at Thomas, Zollars & Lynch CPAs, on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also issued new forms that were updated.”

First Draw PPP Terms of loan forgiveness

Ppp Loan Forgiveness Taxable Income – First Draw PPP loans made to borrowers who are eligible can be granted total loan forgiveness within the 8-to 24-week period after loan disbursement:

  • The same goes for the pay and benefits for employees.
  • The proceeds of the loan can be used to pay payroll costs or other eligible expenses.
  • A minimum of 60% of profits are spent on payroll costs

Second Draw PPP Loan Forgiveness Conditions

Second Draw PPP loans given to eligible borrowers qualify for total loan forgiveness if they do so during the 8to 24-week covered period following loan disbursement:

  • Pay and worker levels are maintained in the same way as required for the First Draw PPP loan
  • The loan funds could be used to pay for payroll costs or other eligible expenses.
  • At least 60% of the profits are used for the cost of payroll
  • What is the best time to apply for loan forgiveness

After all loan’s proceeds have been used the borrower is eligible to be forgiven. The borrower can request forgiveness anytime up until the date of maturity of the loan. If the borrower does not apply for forgiveness within 10 months after the last day of the covered period and the loan is not renewed, PPP loans are not deferred any longer, and borrowers will begin making monthly payments to their PPP lender.

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