PPP Loan Forgiveness Information - News You Can Use
Post by : Admin on Dec 10,2020
While we usually try to stay within our lane, we know that many of our corporate clients and business accounts took advantage of the PPP loans offered to help businesses stay afloat during the pandemic. Along with those loans came much confusion about whether it was forgivable and if so, how do you ask for forgiveness. We have some important information from the Small Business Administration (SBA) that includes a simple one-page forgiveness application.
If your loan was less than $50,000 you are likely eligible for forgiveness using this one-page form that eliminates complicated calculations previously required. In fact, it is so simple that small-business borrowers merely need to confirm that the PPP-loan proceeds were used for eligible costs, and to provide supporting documentation showing payment of these expenses. Small-business owners will certify on the forgiveness request that the forgiveness amount is within the SBA guidelines. Business owners are advised to maintain their underlying PPP records for six years as the SBA can audit your business with connection to this loan.
PPP loan proceeds could have been spent on payroll costs entirely and are always eligible for forgiveness when spent only on payroll, but a small businesses could also use up to 40% of PPP loan funds on other qualifying expense, such as rent, business mortgage payments and utilities.
If a small business used their entire PPP proceeds to pay payroll to yourself or your employees, you can simply submit bank statements or cancelled checks showing those payments from the business to the employee to document the qualifying payments. Payments to you as an owner are allowed. Keep in mind, the business owner’s payroll is capped at $20,833. Also, if you received an EIDL Advance, that amount is subtracted on the forgiveness request from the amount that would otherwise be eligible for forgiveness.
Who Cannot Use the Simplified Application
The simplified application cannot be used by small businesses that reduced their full-time employee headcount from pre-pandemic levels or reduced pay rates of employees greater than 25%. In these instances, PPP borrowers will need to use the standard PPP loan-forgiveness application, and qualifying payroll costs will be reduced based on pay rate decreases or full-time employee headcount decreases. For small businesses that can’t use the new simplified application solely because their loan amount was greater than $50,000, they can use the SBA’s PPP EZ Application.
*Information shared from SBA. Consult with your tax advisor for your unique situation