In October 2020, the Small Business Administration (SBA), in consultation with the Treasury Department, made the process easier for forgiving the Paycheck Protection Program (PPP) loans. On the SBA website, businesses will find a simpler loan forgiveness application (Form 3508S) for the PPP loans of $50,000 or less. This form may be used by a borrower of a $50,000 or less PPP loan, except for borrowers that, together with their affiliates, received loans totaling $2 million or greater.
The PPP has provided 5.2 million loans, representing 525 billion dollars of loans to small businesses in America. These businesses represent 68% of the loans processed and 12% of the overall relief provided. Applicants are eligible for loan forgiveness if they devote at least 60 percent of the loans’ proceeds to their payroll expenses. Those businesses that fall short of the 60 percent may be eligible for partial forgiveness.
Borrowers can apply for forgiveness at any time up until their loan matures. However, if they don’t apply for forgiveness within ten months after the last day of the covered period – the 8-week or 24-week period for using the proceeds – then borrowers will have to start making payments.
There is much that remains uncertain about the PPP loan program. According to the IRS, although the forgiveness of the PPP loan is tax-free, borrowers will be unable to claim tax deductions for the business expenses covered by forgiven loan proceeds. Although every business’s situation is different and there is no one-size-fits-all advice, our advice is to seek advice from your accountant before you apply for PPP forgiveness. Congress and/or the SBA and Treasury may make additional adjustments to PPP forgiveness—such as forgiving loans under a certain amount.
You can find further guidance from notices posted on the SBA’s website, www.sba.gov. Questions on the Paycheck Protection Program may be directed to the Lender Relations Specialist in the local SBA Field Office. The local SBA Field Office may be found at https://www.sba.gov/tools/local-assistance/districtoffice.
At Estess CPAs, we specialize in helping businesses save time and money. In addition to providing bookkeeping, payroll, and accounting services, we are here to advise you and help you succeed. Call us today and schedule an appointment at our Belle Chasse or Luling offices:
7822 Highway 23 128 Lakewood Drive
Belle Chasse, LA 70037 Luling, LA 70070
(504) 433-5122 (985) 785-1470