However, salaries eligible for forgiveness remain capped at $100,000. Otherwise, your outstanding balance will continue to accrue interest at 1%, for the remainder of the 5-year period. Yes, as long as you pay it on the next regular billing date, any of those eligible non-payroll expenses (utilities, rent, mortgage interest) can be claimed for forgiveness, prorated to the end of the covered period. Editor’s note: on December 20, a bill was formed that will simplify forgiveness for loans of $150,000 or less. Our guide has everything you need to fill out the application form. Immediately after your loan is approved. If you are self-employed but received a PPP loan through multiple businesses, you are capped at $20,833 in owner compensation across all the businesses you’ve received a PPP loan through. Over the 24 weeks of the PPP period, you spend $36,000 on your employees, more than your PPP loan amount. Final Treasury and SBA FAQs on PPP forgiveness are expected to be released soon and the PPP Loan Forgiveness Tool will be updated to reflect any new changes. Good recordkeeping and bookkeeping will be critical for getting your loan forgiven—you’ll need to keep track of eligible expenses and their accompanying documentation over the 24 weeks. You do not need to adjust your payroll schedule. The 75% minimum salary is $2,250, so you’re paying each person $250 less than that each month. PPP forgiveness approvals could begin soon, SBA says The Small Business Administration has received more than 96,000 Paycheck Protection Program loan forgiveness … Should you go ahead and apply now, if … PPP Loan Forgiveness: What We (Think) We Know, What’s Still Unclear and What Borrowers Can Do Now. Application calculation I’m eligible for 100% forgiveness. Will there be more changes to the program? This is not necessarily the date on which you signed your loan agreement. Got this from Bank of America on Friday, October 9th: New Paycheck Protection Program Loan Forgiveness Application. The lender will then apply to the SBA. If you don’t have a reliable bookkeeping solution in place, Bench can do your bookkeeping for you, all online. If you didn’t have any other payroll expenses factoring into your PPP loan amount, this means that your entire PPP loan could be forgiven for the 24-week period. (If your loan was disbursed before June 5, 2020, you can also choose an 8-week period to spend your PPP loan funds on SBA forgiveness eligible expenses.) A growing number of banks and small business owners, including many within the long-term care sector, have been waiting to file for loan forgiveness under the $760 billion program, in the hopes that the government would issue simplified guidance. This forgiveness application will be used by any borrower who cannot use Form 3508S or Form 3508EZ, or who chooses to fill out the full lengthier application. (Read more about what you need to know about PPP audits). But things get more complicated when you don’t keep your headcount and employee pay levels the same. If you have mortgage interest, rent, or utilities expenses, you must have claimed or be entitled to claim a deduction for those expenses on your 2019 Form 1040 Schedule C in order to claim them for forgiveness. You have until December 31st to do so. For loans being disbursed July 16 and later, this means that you will not be able to take full advantage of the 24 weeks. (Check out our guide on selecting an 8-week or 24-week period written by a CPA). This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Over the 24 weeks of the PPP period, you spend $36,000 on your employees, more than your PPP loan amount. Please make sure you visit the SBA, U.S. Treasury Assistance for Small Businesses, and U.S. Treasury FAQwebsites for the latest information and guidance related to the Paycheck Protection Program. Should I just send my PPP E-Z forgiveness form to the SBA? Further reading: How the Paycheck Protection Program Affects 2020 Taxes. A sub for business owners to discuss and problem solve the use of PPP loans. BOA case manager. Note that employees who reject offers for re-employment may no longer be eligible for continued unemployment benefits. Currently, there's north of $100 billion left in the program's coffers. It was supposed to open mid September, but they're delaying it. The Top (Lesser Known) COVID-19 Small Business Relief Resources, A Guide to SBA 7(a) Loans for Small Businesses. Your lender and the SBA have the right to request and audit your business’s financial documents and records. All expenses that fall under those categories are eligible for forgiveness. Hopefully guidance will be released sooner rather than later. The SBA is currently taking applications, however you must first apply to your lender. The forgiveness period has been extended — I believe to either 24 weeks from origination or 12/31/20, whichever comes first. There is this owner-employee cap that’s basically limits how much a small biz can pay its owner, which i think makes one-person shop impossible to get 100%??? For example, if you worked in an office space in 2019 and did not have a home office, you could not have claimed a deduction on your home mortgage interest. (B2). You had to lay them off in February due to COVID-19. You now need to spend only 60% of the funds on payroll. Want to read more into these exemptions? The difference is scaled up to a 24-week period, ($250 * 6), so $1,500 would be deducted from the forgivable amount. This is important as now 100% of the PPP loan given to a sole proprietor with no other payroll can be forgiven! SBA hasn’t forgiven one loan yet. Learn more. At least 60% of your loan must be used for payroll costs. The SBA posted the PPP loan forgiveness application on its website on June 16, so it is possible to start applying for forgiveness now. PPP loan forgiveness rules make it hard for some business owners to use money. Then click the "Withdraw or decline loan forgiveness" button at the top of the page. You must retain your supporting documents for six years after the loan is fully forgiven or fully repaid, and provide them to the SBA or the Office of Inspector General if requested. You can receive 2.5 times that amount, to help cover eight weeks of payroll. Your forgivable amount will scale in proportion to the amount you spend on payroll, up to the total loan amount. Read more on how a CPA breaks it down. After approving 5.2 million loans totaling $525 billion, the SBA began approving PPP forgiveness applications earlier this week. Take the largest number you obtain. Friends don’t let friends do their own bookkeeping. You have, in most cases, up to 24 weeks from when your loan was disbursed to spend your loan funds on SBA forgiveness eligible expenses. Take A and divide that by B1. You can pay off the outstanding balance at any time with no additional fees. If you have not yet submitted a loan forgiveness application and want to apply using the SBA Form 3508S: Please disregard an earlier email you received from us, which included a link to access our loan forgiveness application. What happens if I’m not approved for forgiveness? The SBA last week released data on PPP loans above $150,000, revealing data errors and loopholes exploited by larger companies to get more than $10 million, the program’s maximum loan size. If you have already submitted a loan forgiveness application: We will continue to process your application unless you inform us that you would like to withdraw your application and reapply using the new application when it becomes available. Got this from Bank of America on Friday, October 9th: New Paycheck Protection Program Loan Forgiveness Application, On October 8, the Small Business Administration (SBA) announced changes to the Paycheck Protection Program (PPP) loan forgiveness process, including a simplified loan forgiveness application (SBA Form 3508S) for certain borrowers with PPP loans of $50,000 or less.*. (Read a CPA’s guide on how the PPP, PUA, and EIDL will affect your 2020 taxes). The SBA has just begun processing forgiveness requests. Learn more about who we are and how we can help beyond monthly bookkeeping. Your loan may be eligible for forgiveness for expenses related to payroll, mortgage interest, rent, or utilities paid or incurred within 24 weeks following the origination date of your PPP loan. Wells Fargo sent me the invitation to submit my forgiveness today. Previously, you had to spend at least 75% of the funds on payroll. The cap amounts are computed using your net profit from line 31 of your 2019 Schedule C. Your easy-peasy road to 100 percent loan forgiveness is the 11-week program. Read more about PPP Rules on Rehiring (FAQ). Applications for loan forgiveness will be processed by your lender. You must maintain at least 75% of total salary. Your net profit that was reported on your Form 1040 Schedule C is multiplied by 8/52. The loan amount is based on your average monthly payroll cost for 2019. As a general partner in a partnership, your eligible compensation is based on your partnership 2019 net earnings. our blog post for the self-employed to learn more. BOA said they were going to have SBA PPP loan forgiveness web portal open in August, which has come and gone. They have forgiven for people who have elected to do the 8 week period. In just 6 minutes you can read a CPA’s breakdown of these safe harbors. The remaining PPP funds will need to be spent on utilities, rent, and mortgage interest expenses in order to be forgiven. You had to lay them off in February due to COVID-19. Bench is an affordable and powerful financial reporting software. Let’s say you have three full-time employees and they each made $3,000 per month, meaning your PPP loan amount was $22,500 (3000 x 3 x 2.5). Yes! If you've already submitted your application, please call us at 866.457.4892. If you get a number smaller than 1, you did not maintain your headcount and your forgivable expenses will be reduced proportionately. Any expenses you will be applying for forgiveness on should not be included in your deductions on your tax return unless suggested by a tax professional. The 8 week period applicable to forgiveness has been extended to 24 weeks. Forgiveness has begun with the SBA last reporting on Nov. 22 that nearly 600,000 forgiveness submissions had been submitted, with about half of the $83.2 billion completed. Loan forgiveness should be applied ten months after expiring of the repayment period, failure to which interest applies from the date of disbursement. Take 5 minutes to read our blog post for the self-employed to learn more. Did you get 100% forgiveness tho? I am assuming most of us will be all applying on December 31st and then the delay will be that they were overburdened. Bench assumes no liability for actions taken in reliance upon the information contained herein. As an example, let’s say you receive an EIDL emergency grant for $3,000. Your lender may allow you to provide additional documentation so they can reevaluate your request. Has anyone used Kabbage for their SBA PPP Loan? Information about your application status will not be available through our financial centers or contact centers due to the nature of this loan process and the steps involved. The funds from the PPP can be used for the following purposes: Payroll—salary, wage, vacation, parental, family, medical, or sick leave, health benefits, Mortgage interest—as long as the mortgage was signed before February 15, 2020, Rent—as long as the lease agreement was in effect before February 15, 2020 (here’s what’s included in rent), Utilities—as long as service began before February 15, 2020 (here’s what’s included in utilities). After you submit your application for forgiveness, your lender is required by law to provide you with a response within 60 days. Your PPP loan and its forgiveness for “compensation” are capped at $15,835 under the eight-week covered period or at $20,833 under the 24-week covered period. As with all PPP loan forgiveness applications, you apply for forgiveness through your lender. You claim the full $22,500 of your loan for forgiveness. This is where Bench comes in. If you’re a seasonal employer, you must divide by B1. Press question mark to learn the rest of the keyboard shortcuts. Do the same with B2. The SBA connects entrepreneurs with lenders and funding to help them plan, start and grow their business. You hire back all three of your employees, but you only pay them $2,000 a month. For the most up-to-date list of lenders taking forgiveness applications, check out our overview. On June 22, 2020, the United States Small Business Administration (“SBA”) released additional guidance related to the Paycheck Protection Program loans (“PPP Loans”) in the form of an Interim Final Rule (“IFR”), which addresses the timing of submitting a loan forgiveness application and that the SBA will allow early loan forgiveness applications. On October 8, the Small Business Administration (SBA) announced changes to the Paycheck Protection Program (PPP) loan forgiveness process, including a simplified loan forgiveness application (SBA Form 3508S) for certain borrowers with PPP loans of $50,000 or less. You are eligible to claim 2.5 months’ worth of your 2019 net profit to replace pay. Properly hiring back employees may be complicated, but our guide simplifies it for you. You claim the full $22,500 of your loan for forgiveness. For example, if you’ve received a PPP loan through two businesses and you’ve received $15,000 in owner compensation replacement from your sole proprietorship, you’ll only be eligible for $5,833 of owner payroll from your other business. No, prepayment is not an allowed use of the PPP and is not eligible for forgiveness. Spending your PPP funds on the right things is straightforward enough. To withdraw your application for loan forgiveness, first sign in to our PPP loan forgiveness portal using the link provided to you in an earlier email. This requirement will be individually assessed for every employee that did not receive more than $100,000 in annualized pay in 2019. The U.S. Small Business Administration (SBA) released guidance Tuesday confirming that Paycheck Protection Program (PPP) loan forgiveness applications are not due on Oct. 31. Read more in our simple guide for partnerships. False. I just checked their website and it is saying not to apply if your 24 weeks hasn't been reached. If any of these conditions apply to an employee, you can also qualify for an exemption: You may also be required to demonstrate you were unable to hire similarly qualified employees for unfilled positions, or document that due to safety requirements, you were unable to return to normal operating levels. in our 5 minute guide of what you need to know. If you get a number equal to or larger than 1, you successfully maintained your headcount and meet this requirement. It must go through your bank first. The eight-week period to use your PPP funds has now been extended to 24 weeks. There is no prepayment penalty. The best part? The Paycheck Protection Program is a brand new lending initiative—and, as such, there are still a lot of question marks as to how to qualify for loan forgiveness. Updated: August 5, 2020. For borrowers with a potential loan payment looming, it can be tempting to rush into the PPP loan forgiveness process, but making sure your members know … If the employee’s pay over the 24 weeks is less than 75% of the pay they received during the most recent quarter in which they were employed, the eligible amount for forgiveness will be reduced by the difference between their current pay and 75% of the original pay. Subsequently, you receive the PPP loan for $25,000. You are entitled to use the PPP loan to replace lost compensation due to the impacts of COVID-19. The new PPP legislation includes changes to forgiveness—including a simplified forgiveness process for borrowers with loans under $150,000—and expanded expenses that are eligible for forgiveness. For more information, visit www.pppforgivenesstool.com. The conditions of the Paycheck Protection Program, Reductions in your forgiveness amount (examples), Forgiveness for self-employed individuals, After the 24 weeks: applying for loan forgiveness, Recordkeeping and required documents for forgiveness. how to fill out your PPP Loan Forgiveness form. If you only hire back two out of the three employees, your workforce is 67% (two thirds) of your original headcount. Now, a firm has more time to spend the PPP loan since the period of the loan has been extended to 24 weeks (previously eight weeks). The Small Business Administration (SBA) is working to finalize the details on both. Not sure if you should go with the 8-week or the 24-week covered period? a CPA’s breakdown of these safe harbors. Forgiveness applications are not being accepted yet by lenders because the SBA is preparing for possible changes to forgiveness guidelines by Congress. We support America's small businesses. PPP Loan Forgiveness: The Complete Guide COVID , Interim and Fractional , Tools and Lists Henning Schwinum June 9, 2020 Vendux LLC ppp , covid19 , recovery , staffing , loan forgiveness Comment Facebook 0 Twitter LinkedIn 0 Reddit Tumblr Pinterest 0 0 Likes Forgiveness application Your lender will likely require these documents in digital format, so take the time to scan any paper documents and keep backups of your digital records. No idea when I'm supposed to file for forgiveness by and how? You will need to fill out a PPP Loan Forgiveness Application form and submit that to your lender. If you had a PPP loan prior to the Paycheck Protection Program Flexibility Act being signed, you can choose to use the original 8-week period instead of the 24-week period. Editor’s notes: On June 17, 2020, SBA and tTreasury released an update to its standard forgiveness application to reflect program changes under the PPP Flexibility Act, as well as a new EZ application. Do not send it to SBA. * When it comes to calculating your forgivable amount, we look at each employee’s individual compensation. Furthermore, your business will need to have complete financial statements at the end of your fiscal year. If you received your PPP loan before June 5, you can still use an 8-week period. If we assume you do not qualify for any rehiring exemptions, when it comes to calculating your forgivable amount, because your workforce is smaller, your forgivable amount will be multiplied by 0.67. It was rather simple. You, the borrower, may not be responsible for repayment of the loan if … Mortgage interest on a warehouse you own to store business equipment, Auto loan interest on a car you own to make business deliveries. Let’s first review the terms of the PPP. You can rehire any staff that were laid off or put on furlough and reinstate any pay that was decreased by more than 25% to meet the requirements for forgiveness, if those changes were made due to COVID-19 between February 15 and April 26. PPP loan forgiveness: 3 things to consider 1. Repeating that for each employee would result in a total of $18,000 forgiven. I’m a SMLLC with max loan amount $20833. You would be able to have $15,075 forgiven. While these are the current eligibility requirements for loan forgiveness, those requirements may change moving forward. Submission procedures vary depending on the lender. Payments to independent contractors cannot be included in the payroll costs. Before you do anything with your PPP money, make sure you understand your specific requirements for loan forgiveness.. To qualify for total PPP loan forgiveness, you must use the funds within 24 weeks after your initial loan disbursement or by December 31, 2020—whichever one occurs first—and only for approved costs. If you have started, but not yet submitted, a loan forgiveness application: You are welcome to continue with your application or withdraw it and reapply using the new application when it becomes available. Our guide has everything you need to fill out the application form. All payroll that your employees incur over the 24 weeks is eligible, even if the actual payout date falls outside the eight weeks. Check out our guide on selecting an 8-week or 24-week period written by a CPA, Learn more about how payroll providers are supplying PPP specific reports, Read more about what you need to know about PPP audits, step-by-step guide to filling out your PPP Loan Forgiveness Application form, How the Paycheck Protection Program Affects 2020 Taxes, Read a CPA’s guide on how the PPP, PUA, and EIDL will affect your 2020 taxes. Here is the calculation you can use to determine if you’ve met this requirement: First, determine the average number of full-time equivalent employees you had for: The 8-week or 24-week period following your initial loan disbursement, (A), and January 1, 2020 to February 29, 2020. These are the required documents you will need to collect to provide with your PPP loan forgiveness application. The maximum partner compensation is capped at the 2019 Schedule K-1 net earnings from self-employment (reduced by claimed section 179 expense deduction, unreimbursed partnership expenses, and depletion from oil and gas properties), all multiplied by 0.9235. Getty. Firms also have until Dec. 31, 2020 to rehire workers (previously, they had until June 30). Sign up for a trial of Bench. Here is a full breakdown of the PPP Flexibility Act. Stay informed on how to qualify for PPP loan forgiveness. We’ll do one month of your bookkeeping and prepare a set of financial statements for you to keep. Commentary: Help small businesses: Simplify PPP loan forgiveness process By Christopher Williston, For the Express-News June 25, 2020 Facebook Twitter Email LinkedIn Reddit Pinterest The main factors to consider are whether you’re a self-employed individual collecting the owner compensation benefit, and whether you have enough eligible expenses to spend the loan on. They clarified that you should assume you will receive forgiveness on the eligible expenses regardless of whether you’ve received (or applied for) forgiveness yet. Applications for loan forgiveness will be processed by your lender. The best part of the Paycheck Protection Program is that 100% of the loan can be forgiven—if you meet certain criteria. Check out our full review of What Are Utility Costs for the PPP? Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. Take 10 minutes to read our walkthrough of how to fill out your PPP Loan Forgiveness form. Get started on a free trial today to learn more. No pressure, no credit card required. The CARES Act, which was enacted on March 27, 2020, implemented the Paycheck Protection Program ("PPP"), which allows small businesses to receive a forgivable loan of … The minimum 75% rule spent towards payroll costs to be eligible for full forgiveness has been decreased to 60%. A conversation with a bookkeeper can help make sense of your specific situation. Any expenses that you claim for forgiveness under the PPP cannot then be deducted from your expenses. On November 18, the IRS confirmed that any forgiven expenses will not be tax deductible. There is a deadline for applying for forgiveness: business owners have to apply within 10 months of their PPP loan ending in order to avoid having to start payments. Based on this, we recommend that borrowers and CPA firms wait for the final guidance before generating the final signed SBA form 3508. One week after issuing a Loan Forgiveness Application and step-by-step borrower instructions (discussed in an earlier blog), the Small Business Administration (SBA) released two interim final rules (IFRs) on the Paycheck Protection Program (PPP) loan forgiveness requirements and roles and responsibilities of borrowers and lenders.The IFRs cover the process for loan forgiveness and … When can I apply for PPP loan forgiveness? How will PPP loan forgiveness affect my taxes? Submitted my 2019 Schedule C with it. Share; Tweet Reddit Flipboard ... Senate to give businesses more time to qualify for loan forgiveness…