PPP Loan Forgiveness Information
News you Can Use
As promised, our educational blogs cover important topics of running your business. We know that many of our clients 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 $2m, you are likely eligible for complete 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, such as payroll, rent/mortgage and utilities. There is minimal documentation required to prove these expenses. In most cases, the application takes about 10 minutes to complete. We advise you to maintain underlying PPP records for six years as the SBA can audit your business with connection to this loan during that time period.
PPP loan proceeds could have been spent on payroll costs entirely and are always eligible for forgiveness when spent only on payroll, but small businesses were also able to use up to 40% of PPP loan funds on other qualifying expense, such as rent, business mortgage payments and utilities.
Simplified Documentation
If a small business used their entire PPP proceeds for 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.
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 the pay rate 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 simplified 3508EZ application because their loan amount was greater than $2m will have to use a long form and should consult with your CPA.
