PPP Update: SBA Releases Loan Forgiveness Application Instructions
If you have questions about the Paycheck Protection Program (PPP), you’re not alone. We’ve received a number of inquiries seeking clarity about PPP rules and guidelines for loan forgiveness eligibility. As you likely know, the PPP offers small businesses a lifeline in the form of a forgivable loan that they can use to cover up to eight weeks of payroll costs, mortgage interest and other expenses.
On Friday, May 15, 2020, the Small Business Administration (SBA) provided more details about its much anticipated loan forgiveness application for borrowers. The SBA released the form, which contains detailed instructions for completing it, in consultation with the U.S. Department of the Treasury.
“To apply for forgiveness of your Paycheck Protection Program (PPP) loan, you (the Borrower) must complete this application as directed in these instructions, and submit it to your Lender (or the Lender that is servicing your loan). Borrowers may also complete this application electronically through their Lender.
“This application has the following components: (1) the PPP Loan Forgiveness Calculation Form; (2) PPP Schedule A; (3) the PPP Schedule A Worksheet; and (4) the (optional) PPP Borrower Demographic Information Form. All Borrowers must submit (1) and (2) to their Lender.”
The document can be found on the SBA’s website here.
We are monitoring the issue very closely regarding if expenses that qualify the loan for forgiveness will be tax deductible. The IRS states that, as of now, business owners who accept the loan forgiveness will not be able to write off the expenses that qualify the loan for forgiveness. If this is the case, entrepreneurs could face higher tax bills as they prepare to pay estimated taxes for the first and second quarters of 2020 on July 15.
The IRS has explained that, by not allowing PPP borrowers to deduct what would otherwise be deductible expenses, it’s preventing what it calls a “double tax benefit.” Because the PPP loan is forgivable, and exempt from taxes, the IRS reasons that taking deductions for expenses related to it would be double-dipping on the part of borrowers. Lawmakers are currently proposing a bill that would permit small businesses to take those expenses as deductions.
Chris Smith, CPA and Owner