The U.S. Small Business Administration released a one-page form aimed at simplifying the process of applying to forgive Paycheck Protection Program loans, together with updated and revised forms to comply with the latest stimulus legislation.
Congress approved the COVID-19 relief plan last month, which offered $284 billion in funding to small businesses that needed loans. This money was used to mitigate the economic effects of the coronavirus outbreak. It included a requirement for the SBA to issue simplified forms within 24 days of the bill being adopted to make the process of applying for forgiveness. It also included conditions meant to encourage more bank loans by community banks, especially for minority-owned businesses that had trouble getting loans last year.
“The Small Business Administration met the requirement to issue the single-page form for loan forgiveness under the PPP within 24 hours of the date of the 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 released more updated forms.”
Forgiveness terms for the first draw of PPP loans
Tax Rate On Forgiven Student Loans – For eligible borrowers, First Draw PPP loans are eligible to forgive loans. This applies 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 proceeds are used on payroll expenses and other expenses that are eligible and
- At least 60% of profits go towards the cost of payroll
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans made to borrowers who meet the criteria are eligible for complete loan forgiveness, if within the 8to 24 week covered period following loan payment:
- Employee and compensation levels are maintained in the same way as required for the First Draw PPP loan
- The loan proceeds are spent on payroll expenses and other eligible expenses; and
- Minimum 60% of proceeds go to expenses for payroll
- What is the best time to apply for loan forgiveness?
A borrower can apply for forgiveness only after the loan’s proceeds for which the borrower wants forgiveness have been used. The borrower can request forgiveness at any time prior until the date of maturity of the loan. If they do not file for forgiveness within 10 months of the end of the period covered, then PPP loans are no longer deferred, and the borrower will be required to make payment to their PPP lender.