Social Security Loan Forgiveness

Social Security Loan Forgiveness

The U.S. Small Business Administration has released a 1-page form that simplifies the application for the cancellation of Paycheck Protection Program loans. The form also contains newly updated forms that comply with the latest stimulus law. 

The COVID-19 relief package that Congress adopted last month revived the PPP with $284 billion in funding for small businesses seeking forgiven loans to help cope with the economic fallout from the coronavirus outbreak. It also included a requirement that the SBA to issue simplified forms within 24 hours of the bill being approved by the lawmaker to streamline the procedure of applying for forgiveness. It also included conditions that aim to increase the number of loans from community banks, especially for minority-owned companies that were unable to obtain loans in the past.

Social Security Loan Forgiveness

“The Small Business Administration met the requirement of releasing the single-page form for PPP loan forgiveness by 24 days after the date of enactment the Consolidated Appropriations Act, 2021,” wrote Ed Zollars who is a partner of Thomas, Zollars & Lynch CPAs on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also published new forms.”

Forgiveness terms in the initial draw of PPP loans

Social Security Loan Forgiveness – First Draw PPP loans granted to eligible borrowers qualify for total loan forgiveness within the 8 to 24-week period after the disbursement of loan:

  • Employee and compensation levels are maintained
  • The loan proceeds can be used to cover expenses for payroll or other expenses that are eligible.
  • At least 60% of proceeds go to payroll costs

Second Draw PPP Loan Forgiveness Terms

Second Draw PPP loans made to eligible borrowers qualify for complete loan forgiveness, if within the 8– to 24-week duration following loan payment:

  • The First Draw PPP loan requires that the employee and compensation levels are maintained in the exactly the same manner.
  • The loan proceeds are used on payroll costs and other eligible expenses; and
  • At least 60% of proceeds go to payroll costs
  • When and how do I apply for loan forgiveness?

When all of the loan’s proceeds have been used, a borrower can apply to be granted forgiveness. The borrower can request forgiveness anytime up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 years of the date of expiration of the period covered and the loan is not renewed, PPP loan payments are not deferred any longer, and borrowers must make monthly payments to their PPP lender.

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