The U.S. Small Business Administration has released a single-page form designed to make it easier for applicants to complete the application process for forgiveness of Paycheck Protection Program loans, along with newly updated and revised forms that comply with the most recent stimulus legislation.
The COVID-19 relief package that Congress approved last month renewed the PPP with $284 billion of funds for small businesses that want forgivable loans to help them deal with the financial fallout of the coronavirus epidemic. It also included a requirement that the SBA to issue simplified forms within 24 days of the bill being signed into law to simplify the procedure of applying for forgiveness. The legislation also contained conditions meant to encourage more loans from community banks, particularly for minority-owned businesses that struggled to get loans in the past.
Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs stated that the Small Business Administration fulfilled the requirement to issue the one-page form for PPP loan forgiveness within 24 days of the date of enactment in the Consolidated Appropriations Act, 20,21. This was published on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also published updated forms.”
Forgiveness terms in the first draw of PPP loans
Tax Form For Student Loan Forgiveness – For eligible borrowers First Draw PPP loans are qualified for loan forgiveness. This happens when the loan payment is made within an 8– to 24 week period.
- Employee and compensation levels are ensured
- The loan proceeds can be used to pay for the cost of payroll as well as other eligible expenses.
- A minimum of 60% of the profits are used for the cost of payroll
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans made to borrowers who meet the criteria are eligible for full loan forgiveness if during the 8– to 24-week duration following loan payment:
- The levels of compensation and employee pay are maintained in the same way as required for the First Draw PPP loan
- The loan proceeds are used on payroll costs as well as other eligible expenses and
- At least 60% of proceeds are spent on payroll costs
- How and when to apply for loan forgiveness?
When all of the loan’s proceeds have been used, a borrower can apply to be granted forgiveness. Borrowers can request forgiveness at any time until the date of maturity. If they do not file for forgiveness within 10 months after the last day of the time period that was covered and the loan is not renewed, PPP loan payments are no longer deferred, and the borrower will be required to make loan payments to their PPP lender.