The Small Business Administration (SBA) began accepting PPP loan forgiveness applications in August and began approving them in early October. As you navigate the next steps in the forgiveness process, here are a few things to consider.
New $50,000 forgiveness limit
Recently, SBA and U. S. Treasury announced a simplified forgiveness process for recipients of Paycheck Protection Program (PPP) loans of $50,000 or less.
Included with the announcement was the posting of Form 3508S, a short forgiveness application requiring the borrower’s contact information, basic loan information and signatures. Detailed computations aren’t required, but the borrower must be able to provide the documentation outlined in the instructions to support the forgiveness amount entered on Form 3508S.
Please refer to the Form 3508S instructions for detailed information on PPP loan forgiveness requirements.
My loan is more than $50,000. When do I NEED to file for forgiveness?
Technically, you have until the maturity date of your PPP loan (2 years or 5 years depending on the timing of your loan) to file your forgiveness calculation. However, if you wait to file for forgiveness, payments will be required 10 months after your 8 week or 24 week covered period ends.
Can I file NOW?
Yes, you can file for forgiveness at any point between now and the loan maturity date. (Be sure to confirm your bank is accepting forgiveness applications right now.)
- If you file now, all payments are deferred until a determination of the amount of forgiveness is made by the SBA.
- Banks have 60 days from receipt of the forgiveness application to review and approve the application and forgiveness amount. It is then forwarded to the SBA.
- The SBA has 90 days after the lender issues its decision of the forgiveness amount to reimburse the approved amount to the lender.
- Lenders should notify the borrower immediately of the SBA’s approval.
Are expenses paid with PPP loan proceeds deductible?
As it stands today under the current tax law, the expenses paid with PPP loan proceeds are NOT deductible, basically meaning any debt forgiveness IS taxable. However, this is currently a hot debate in Congress and only time will tell whether Congress exempts the forgiveness from being taxable. PWB is closely monitoring the situation and will notify clients of any changes.
If you have questions about PPP loan forgiveness, we’re here to help. Your PWB CPA can guide you through the forgiveness process and answer any questions you have.