Borrowers with smaller loans should still consider filling out the longer forgiveness application to ensure they qualify for full forgiveness. Though the one-page application is simpler, you’re still required to meet the forgiveness rules.
You have 10 months from the end of the loan period to apply for forgiveness. If you wait too long, loan payments will start coming due at a 1% interest rate.
3. Wait for your lender’s decision
Within 60 days, your lender will ount. You might get full, partial, or no forgiveness. Whatever the decision, it goes directly to the SBA, requiring no action on your part.
You’ll be notified of the loan forgiveness amount as your case moves to are online installment loans legal in Washington the SBA. If you don’t like the answer – maybe you only got partial forgiveness when you expected 100% – you have 30 days from receiving your lender’s decision to request the SBA review your case again.
The SBA will render its own final decision within 90 days. They might reach out and ask for additional information.
The SBA’s final decision is, well, final. If you want to appeal your lender’s PPP forgiveness decision, talk to a CPA for guidance.
4. Begin repaying your loan
If there’s a balance left, PPP loan repayment starts 10 months after the loan period. You were done in the last step if your lender and the SBA decided to forgive the entire loan.
PPP forgiveness rules have changed a few times in the past nine months, so my best advice is to wait for lenders and the SBA to catch up with the newest legislation before applying for forgiveness.
For smaller loans, wait to apply for forgiveness
A shorter forgiveness application is on the way for most PPP loans. If you received a PPP loan for $150,000 or less, wait until your lender and the SBA are ready to accept your application.
The December stimulus package also repealed a deduction to reduce a company’s PPP loan forgiveness amount by the amount of its EIDL Advance grant, which provided struggling businesses up to $10,000 in grant funding. The SBA has yet to update its applications, so you’ll need to wait until the application reflects that change.
Those applying for other small business loans might not have the luxury of time. If you need to clear the PPP debt from your books, go ahead and apply for forgiveness. You could be waiting weeks before lenders update loan forgiveness procedures.
Consult a professional
The PPP is a loan program, meaning you promised to repay a given amount unless you meet specific conditions. Making a small mistake on your forgiveness application can lead to owing thousands back to the government.
Though you can patch up any small error you let slip through, it’s best to get your application done correctly the first time. For that, you’ll at least want a tax professional to look over your application before submitting it.
The PPP rules have changed a few times since the program launched in March. It’s important to keep up with the latest PPP loan guidance to ensure you’re maximizing your forgiveness amount and small business tax deductions.
For example, the December COVID-19 stimulus package added new forgivable expenses to its list of non-payroll costs, potentially increasing your forgiveness amount.
The relief bill further clarified Congress’s stance on deducting expenses covered by PPP funds. Directly refuting the IRS’s and Treasury Department’s guidance, legislators say you may fully deduct any business expense you paid with a PPP loan. In other words, deductions are business as usual for the 2020 tax year.