The U.S. Small Business Administration has released a 1-page form which makes it simpler to request forgiveness of Paycheck Protection Program loans. The form is also updated with new forms to comply with the most recent stimulus legislation.
The COVID-19 aid package Congress approved last month renewed the PPP with $284 billion in financing for small-scale businesses looking for forgiven loans to help to deal with the effects of economic collapse from the coronavirus pandemic. The law requires that the SBA issue simplified forms within the first 24 hours after the bill’s passage into law. This is to make it easier to apply for forgiveness. It also included conditions that encourage banks in the community to lend more specifically to minority-owned companies who had a difficult time getting loans last year.
“The Small Business Administration met the requirement to issue the one-page form for the forgiveness of PPP loans by 24 days after 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 additional updated forms.”
Forgiveness terms for the initial draw of PPP loans
Student Loan Forgiveness Tax Exemption – For those who qualify First Draw PPP loans can be qualified for loan forgiveness. This happens if the loan disbursement occurs within an 8– to 24-week timeframe.
- The levels of compensation and employee pay are kept at a constant level.
- The loan funds are used on payroll and other expenses that are eligible and
- At least 60% of proceeds are spent on payroll costs
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans granted to borrowers who are eligible can be granted complete loan forgiveness, if within the 8to 24 week time period after loan payment:
- The First Draw PPP loan requires that the employee and compensation levels be maintained in the identical manner.
- The loan proceeds can be used to cover the cost of payroll as well as other eligible expenses.
- A minimum of 60% of proceeds are used to pay for payroll expenses
- What is the best time to apply for loan forgiveness
A borrower can apply for forgiveness only after all loan proceeds to which the borrower wants forgiveness have been utilized. The borrower can apply for forgiveness at any point up to the date at which the loan matures. If borrowers do not apply for forgiveness within 10 month after the date they will be able to repay the loan will be able to receive the loan payment from their PPP lender.