The U.S. Small Business Administration has issued a one-page form that simplifies the application for the cancellation of Paycheck Protection Program loans. The form is also updated with new forms that comply with the latest stimulus legislation.
The COVID-19 relief plan that Congress passed last month revived the PPP with $284 billion in funding for small businesses seeking forgiven loans to help cope with the economic fallout of the coronavirus epidemic. The law requires that the SBA release simplified forms within the first 24 hours after the bill’s passage into law. This was to make it easier to apply for forgiveness. It also included conditions that would encourage banks in the community to lend more particularly to minority-owned businesses that had difficulty getting loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs stated that the Small Business Administration fulfilled the requirement to publish the one-page form for PPP loan forgiveness within 24 days from the date of enactment under the Consolidated Appropriations Act, 20,21. This was on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also issued new forms.”
Terms for forgiveness for the first draw of PPP loans
Student Loan Forgiveness Tax Calculator – First Draw PPP loans granted to borrowers who meet the criteria are eligible for full loan forgiveness if during 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 proceeds are spent on payroll expenses and other expenses that are eligible and
- At least 60% of profits are spent on payroll costs
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans granted to borrowers who are eligible can be granted complete loan forgiveness, if within the 8to 24-week duration following the loan’s disbursement
- The First Draw PPP loan requires that the employee and the compensation levels be maintained in an identical manner.
- The loan proceeds are used on payroll expenses and other eligible expenses; and
- At least 60% of proceeds are used for the cost of payroll
- How to request loan forgiveness and when to apply
When all of the loan funds have been utilized The borrower may apply for forgiveness. The borrower can request forgiveness any time up to the maturity date of the loan. If the borrower does not apply for forgiveness within 10 years of the last day of the time period that was covered the PPP loans are no longer deferred and borrowers must make loan payments to their PPP lender.