Changes in business structure: Many borrowers have had to revise their business structure in the face of the pandemic. Changes to the legal structure of a business, a decrease in the number of employees, or the elimination of a department or subsidiary after a borrower has taken out a PPP loan may affect the borrower`s ability to obtain a full or partial forgiveness of the loan. Depending on the timing of these changes, it may be beneficial to ask for forgiveness before the changes take place. See also below, on the need for prior consent from the lender for “changes in the structure of the business”. No. Any expenses you request forgiveness under the PPP will then not be deductible from your expenses. A forgiveable PPP loan is already tax-free, so the IRS wants to avoid double diving (getting free money twice from the same source). (Read a CPA`s guide on how PPPs, PUAs, and EIDLs will affect your taxes for 2020.) Employee Retention Credit Update: The Appropriation Act, 2021 also amended the provisions of the ERC. Prior to the coming into force of this Act, PPP recipients were not eligible for the ERC. The Appropriation Act 2021 allows an employer who has received a PPP loan to apply for an ERC retroactively to the date of the initial entry into force of the CARES Act. On March 1, 2021, the IRS issued EWC guidelines as they apply to eligible salaries paid after March 12, 2020 and before January 1, 2021, and address interaction with PPP loans.
This forecast only applies to 2020. An eligible employer may choose to disregard certain eligible wages for the purposes of the ERC. However, it is presumed that a PPP borrower has made an election for eligible salaries included in the amount specified as salary costs in the loan forgiveness application. Therefore, PPP borrowers should carefully assess and calculate which eligible salaries should be included as salary costs in the loan forgiveness application to maximize the REB if the borrower meets the other REB requirements. The PPP program was modified with major revisions in June 2020 and December 2020 to create more flexibility in the use of loan funds by borrowers. The December bill also reopened the PPP program so that more businesses can apply for a first loan and created the possibility for businesses to potentially get a second PPP loan. Mergers and Acquisitions and Change of Ownership: A PPP loan can have a variety of effects on future and potential M&A transactions and changes in ownership. You can reinstate all employees who have been laid off or on leave and reinstate all salaries that have been reduced by more than 25% to meet pardon requirements if these changes were made due to COVID-19 between February 15 and April 26.
You have until December 31 to do so. If your lender isn`t currently accepting PPP remittance applications, take the time to review your numbers to see if you meet the requirements to grant your loan in full. At least 60% of your loan should be used for labor costs. Payments to independent contractors cannot be included in salary costs. Your rebate amount is compared to the amount you spend on payroll to the total amount of the loan. December 10, 2020 – The Paycheck Protection (PPP) program was launched to help U.S. businesses overcome the COVID-19 coronavirus, and businesses applied en masse: About 5 million businesses were approved for PPP loans by the Small Business Administration (SBA) before the August 8 application deadline. But the details of the program — namely how companies that received loans would be evaluated for the remittance of those loans — were less clear. But others (like Chase and PNC) have suspended acceptance of pardon requests to make updates based on the new pardon application forms released on January 19, 2021.
These are forms 3508, 3508EZ and 3508S. December 31, 2020 is the last deadline for eligible expenses. For loans paid on July 16 and later, this means you won`t be able to take full advantage of the 24 weeks. For example, if you worked in an office in 2019 and didn`t have a home office, you wouldn`t have been able to claim a deduction from your mortgage interest. Even if you are currently working from home, you are not eligible to charge mortgage interest payments for the rebate. The SBA has launched its own PPP credit remittance portal. It is designed to simplify the forgiveness process and allow some borrowers to request a discount directly through the SBA portal. This portal can be found here. To be eligible to use the portal, businesses must have borrowed $150,000 or less, and most importantly, PPP lenders must opt for it.
Since not all lenders have opted for this, companies must first determine if this is the case. A list of participating lenders can be found here. If your PPP lender has not opted for the SBA Direct Forgiveness Portal or if you have borrowed more than $150,000, you will still need to apply for a rebate through your lender. Here`s a complete guide to the U.S. Chamber of Commerce`s PPP loan forgiveness. On June 22, 2020, additional rules for credit remittance applications were published. These new rules have listed several scenarios in which a business owner can submit their application. For example, a business owner may submit their loan forgiveness application no later than the loan maturity date.
The maturity date of a loan is the end date of the full repayment of the loan. In the 24 weeks of the PPP period, you spend $36,000 on your employees, more than the amount of your PPP loan. You claim the entire $22,500 of your loan for the rebate. If you received a paycheck protection program, your loan is fully forgivable if it is spent correctly. If you are using your PPP loan funds, you may be wondering what the period for applying for a PPP rebate is. The short answer? It depends on when you received your loan. For all the details, read on. Here`s our complete guide on how to prepare for the full loan forgiveness. At Bench, we help you keep track of all your out-of-pocket expenses. Before asking for forgiveness, our team of experts is ready to answer all your questions and help you identify the information you need to complete your pardon application. Learn more about how we support businesses with PPP loans.
Revisions to the PPP in the December 2020 Coronavirus Assistance Act required any company with a loan of $150,000 or less to be able to complete a simplified unilateral application. You must keep your receipts for six years after the loan has been fully granted or repaid in full and make them available to the SBA or the Office of the Inspector General upon request. All PPP loans are eligible for a full loan forgiveness as long as the business owners have followed certain loan criteria for a covered period during which they have had to spend the money. They had to maintain employment and compensation levels and spend loan funds on labor costs and other eligible expenses, with at least 60% of the loan proceeds going to the company`s payroll. Eligible expenditures were expanded in December to include supplier costs, health and safety improvements, and certain types of property damage. After submitting your pardon application, your lender is required by law to provide you with a response within 60 days. Each lender will accept pardon requests through its own online portals. Check to see if your lender accepts pardon applications. You can also be notified by email. Because of the many variables that affect each borrower differently, a borrower should consider discussing the loan forgiveness process with legal counsel before filing the application. Schwabe is committed to providing our customers with up-to-date resources to understand the CARES law and manage the COVID-19 pandemic. You can find more information on the PPP loan forgiveness application on our PPP portal.
This article summarizes the legal aspects relevant to the PPP program and does not constitute legal advice. For legal advice on your situation, you should contact a lawyer. In addition, Brian says companies should take note of the additional steps expected for issuing larger loans. Loans over $2 million require an additional questionnaire to further determine the need for a bona fide loan when applying for a rebate. This form describes things like liquidity at the time of application, other sources of funding, and other subjective factors. Any interest paid on the mortgage on real estate used for commercial purposes is an eligible expense for which the PPP can be used and entitles you to a rebate. These are the required documents that you must collect to submit your PPP loan forgiveness application. Your lender may have additional requirements.
If you do not apply for a loan waiver within 10 months of the last day of your covered period, you will need to make payments to your PPP lender at a 1% interest rate incurred on the loan. However, you can still claim a rebate even after you start repaying the loan, at any time until the loan maturity date, which is two years for loans prior to June 5, 2020 and five years for loans issued after that date. .
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