By: Ashley A. Constable – Staff Accountant
As borrowers approach the end of their 24 weeks for the Payroll Protection Program (PPP), the question “What do I need to do to apply for forgiveness?” goes through their minds. Many borrowers scrambled getting items put together to apply for the PPP loan because funds were limited, but they do not need to rush when applying for forgiveness. The borrower must apply for forgiveness within ten months following the end of the covered period of 24 weeks. If forgiveness is not applied for, loan payments will begin at the end of this 10-month period. Once forgiveness is applied for, the lender has up to 60 days to review the forgiveness application. The lender will then submit its preliminary decision to the SBA, and the SBA has up to 90 days to review the application and make the final determination. If only a portion of the loan is forgiven or if the forgiveness application is denied, any remaining balance due on the loan must be repaid by the borrower on or before the maturity date of the loan.
Before applying for forgiveness, ensure the PPP funds were used within the following guidelines:
- At least 60% of the funds need go toward defined payroll expenses. This is for your employees’ payroll and does not include contractor payments.
- Employers must maintain the same number of employees through the period.
- Employers must maintain at least 75% of total salary. This will be calculated employee-by-employee and does not include employees who made more than $100,000 in 2019.
- There are other special requirements for those who are self-employed or are active partners in a partnership.
- There are multiple approved methods to calculate the PPP funds usage and some exemptions may apply.
If borrowers followed these guidelines, they should be able to receive full forgiveness for their PPP loan.
Many borrowers are asking if they can get PPP expenses forgiven and deduct them from their taxable income as well. Based on current guidance from the SBA, the answer is no; the forgiven expenses are not tax deductible. Any expenses that are claimed to be forgiven under the PPP program cannot then be deducted from taxable income, as the IRS wants to prevent double-dipping or receiving a tax-free grant and then applying a tax deduction for the expenses paid for by that grant.
We understand borrowers are eager to apply for forgiveness, but we want to stress there is not a rush for submitting your application. Borrowers need to make sure they fill out their loan applications and have all the information needed before submission to ensure there is no delay in the processing.
We are excited to be hosting a webinar on Tuesday, November 17, 2020 from 11am-12pm to go through the details of the PPP forgiveness process. If you have questions, we encourage you to attend this webinar, so you can better determine if you will need assistance with this process. To register for the PPP educational webinar, please visit our website at www.mybuckingham.com/events. Please also feel free to reach out to one of our team members if we can be of any assistance through this process.