The U.S. Small Business Administration has released a single-page form that aims to simplify the application process for forgiveness of Paycheck Protection Program loans, along with newly revised and updated forms to meet the requirements of the most recent stimulus legislation.
The COVID-19 aid package Congress adopted last month revived the PPP with $284 billion of financing for small-scale businesses looking for forgiveness loans to help them cope with the economic fallout from the coronavirus pandemic. The law requires that the SBA provide simplified forms within the first 24 hours of the signing into law. This was to facilitate the application for forgiveness. It also included conditions to encourage community banks to lend more specifically to minority-owned companies that had difficulty getting loans last year.
“The Small Business Administration met the requirements to release the single-page form for PPP loan forgiveness by 24 days after the date of enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars who is a partner of Thomas, Zollars & Lynch CPAs, on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also issued the updated forms.”
Terms for forgiveness for the first draw of PPP loans
Where To Put PPP Loan Forgiveness On Form 990 – For eligible borrowers First Draw PPP loans can be suitable for loan forgiveness. This applies when the loan payment is made within an 8– to 24-week period.
- Pay and worker levels are ensured
- The proceeds of the loan can be used to cover expenses for payroll or other expenses that are eligible.
- Minimum 60% of proceeds go to payroll costs
Second Draw PPP Loan Forgiveness Terms
Second Draw PPP loans granted to borrowers who meet the criteria are eligible for full loan forgiveness if during the 8to 24 week time period after the loan’s disbursement
- Employee and compensation levels are maintained in the same way in accordance with the First Draw PPP loan
- The proceeds of the loan could be used to pay expenses for payroll or other expenses that are eligible.
- A minimum of 60% of the proceeds are used to pay for payroll expenses
- How do I apply for loan forgiveness , and when to apply
When all of the loan funds have been utilized The borrower may apply for forgiveness. The borrower can apply for forgiveness at any time up to the date at which the loan matures. Borrowers who don’t request forgiveness within 10 month of the expiration date of the loan will be able to receive payment from their PPP lender.