PPP Loan Forgiveness – LNK Tax Group

PPP Loan Forgiveness – LNK Tax Group

Paycheck Protection Program PPP Loan

Paycheck Protection Program PPP LoanBorrowers who received Paycheck Protection Program (PPP) loans under the Coronavirus Aid, Relief, and Economic Security (CARES) Act are asking their tax professionals if and how they will qualify for PPP loan forgiveness. There is uncertainty over some of the program details. Organizations. especially small to medium sized businesses, worry about meeting the loan forgiveness requirements.

While you may be anxious to apply for forgiveness, there are five factors affecting the forgiveness application process.

First, most lenders are not ready to process a loan forgiveness application. Many are still developing tools or will leverage other automation options for a more efficient process. Until the U.S. Small Business Administration (SBA) and the U.S. Treasury Department issue final guidance, those tools and automations cannot be finalized. When that guidance will be available is uncertain.

Second, organizations have 24 weeks to use their PPP money, leaving them more time to take steps that will help them qualify for full loan forgiveness. Borrowers who received their loans before June 5, 2020, can choose either eight weeks or 24 weeks for their covered period. With the increased flexibility, the PPP loan funds can be used strategically.

Third, payroll costs are a significant component of PPP loan forgiveness. Many payroll providers are developing custom reports specifically to comply with PPP guidance. However, like lenders, they are waiting on final SBA and Treasury guidance so they can prepare the PPP-compliant reports that borrowers will need.

Fourth, borrowers are not required to make any loan payments before they apply for forgiveness or until 10 months after their covered loan period ends. Since payments are not due yet, there is less urgency to apply for forgiveness.

Lastly, applying for forgiveness may be easier than businesses expect. Borrowers can use a simplified process through SBA Form 3508EZ if they meet at least one of these requirements:

  • They are self-employed individuals, independent contractors or sole proprietors who had no employees when they applied for their PPP loan and who did not include any employee salaries in calculating their average payroll amount in their application.
  • They didn’t reduce salaries or hourly wages for certain employees by more than 25% during the loan period and, except for specified exceptions, didn’t reduce the number of employees or the average paid hours for employees between Jan. 1, 2020, and the end of their covered loan period.
  • They did not reduce salaries or hourly wages for certain employees by more than 25% during the loan period and were unable to operate at the same business activity level during the loan period because of federal safety requirements or guidance related to the pandemic. Tax professionals expect SBA guidance to help determine how bro

Full article: https://lnktax.com/ppp-loan-forgiveness-lnk-tax-group/

Contact us for more information (:LNK Tax Group – Santa Clarita): https://lnktax.com/ppp-loan-forgiveness-lnk-tax-group/