Tax Free Student Loan Forgiveness

The U.S. Small Business Administration has issued a one-page form which makes it simpler to request the cancellation of Paycheck Protection Program loans. The form is also updated with new forms that 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 cope with the economic fallout from the coronavirus pandemic. The law requires that the SBA provide simplified forms within 24 hours of the legislation’s signing into law. This was to simplify the process of applying for forgiveness. The legislation also contained conditions to encourage community banks to make more loans particularly to minority-owned businesses who were unable to obtain loans last year.

Tax Free Student Loan Forgiveness

Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs stated that the Small Business Administration fulfilled the requirement to publish the one-page PPP form loan forgiveness within 24 hours of the date of enactment under the Consolidated Appropriations Act, 20,21. This was published on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also issued the updated forms.”

Forgiveness terms for the first draw of PPP loans

Tax Free Student Loan Forgiveness – For those who qualify First Draw PPP loans can be eligible for loan forgiveness. This is if the loan disbursement occurs within an 8 to 24-week timeframe.

  • The same goes for the pay and benefits for employees.
  • The loan funds are used on payroll expenses and other eligible expenses; and
  • Minimum 60% of funds go to the cost of payroll

Second Draw PPP Loan Forgiveness Terms

Second Draw PPP loans for eligible customers are eligible for loan repayment when the loan is paid within an 8– to 24-week period.

  • Pay and worker levels are kept in the same way in accordance with the First Draw PPP loan
  • The loan proceeds are used on payroll expenses and other expenses that are eligible and
  • A minimum of 60% of profits are spent on payroll costs
  • What is the best time to apply for loan forgiveness

The borrower is eligible for forgiveness once all loan proceeds for which the borrower is requesting forgiveness have been utilized. 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 period covered the PPP loan payments can no longer deferred, and borrowers will begin making loan payments to their PPP lender.

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