PPP LOAN FORGIVENESS (3/4/21)
HERE is the scoop from the SBA website.
A borrower can apply for forgiveness once all loan proceeds for which the borrower is requesting forgiveness have been used. Borrowers can apply for forgiveness any time up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 months after the last day of the covered period, then PPP loan payments are no longer deferred, and borrowers will begin making loan payments to their PPP lender.
Your last day of the covered period depends on when you received the PPP Loan….and what period you are using. For most…it will be a 24 week period.
For Example…if you received your loan on April 23, 2020…you can choose an 8 week period or a 24 week period. (if you received your funds after June 5th..you must use a 24week period). In this example…I’m choosing a 24 week period. The end of my covered period is October 9th. I have 10 months from October 9th to apply for Loan forgiveness. So…I have until August to apply for forgiveness.
This will depend totally on your own situation.
If you haven’t already looked into a PPP2 second draw loan....Here are the qualifications from the SBA website.
Who may qualify
A borrower is generally eligible for a Second Draw PPP Loan if the borrower:
Previously received a First Draw PPP Loan and will or has used the full amount only for authorized uses
Has no more than 300 employees; and
Can demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020
For the second DRAW….the window for application is as follows: Small businesses and non-profits with fewer than 20 employees and sole proprietors can apply for Second Draw PPP loans from February 24 through March 9, 2021. The program will be open to all eligible entities March 10 through March 31, 2021.
NEW PPP Loans Are Here! (1/20/21)
Many of the banks are now accepting PPP2 loan applications.
If you need any help…let me know as soon as possible… as I’m working on several applications already.
What I know: 1. You do not need to submit for loan forgiveness of the initial PPP loan before requesting the 2nd draw. 2. You do have to show a drop in revenue of at least 25% for a quarter in 2020 compared to the same quarter in 2019. 3. You do need to have established that the total of your first PPP loan was utilized and for qualified expenditures.
The rules for forgiveness and qualified expenses have changed…and should be clearer and easier to determine.
California says no deduction for expenses paid with forgiven PPP funds (12-23-20)
In anticipation of the new federal stimulus package, we want to let you know that California law specifically requires PPP loan forgiveness to reduce deductions. California does not conform to this federal law, which is amended as part of the stimulus package. Taxpayers will still be required to reduce their deductions on the California return because California enacted AB 1577 (Ch. 20-39), which specifically prohibits taxpayers from claiming any deductions or credits for expenses that are paid with forgiven PPP loan amounts.
So when tax planning, reduce business expenses by the amount of the PPP loan forgiveness on the California return.
IRS releases PPP deduction guidance (11-18-20)
In newly released formal guidance, the IRS has confirmed that taxpayers with a reasonable expectation of PPP loan forgiveness may not deduct expenses paid with those funds, even if the forgiveness has not been granted prior to the end of the taxable year. (Rev. Rul. 2020-27) In the guidance released today, the IRS states that because taxpayers calculate their forgiveness based on eligible expenses paid with PPP funds, the forgiveness of the loan amounts used for those expenses is reasonably expected to occur, and under IRC §265 taking the deductions would be inappropriate.
The IRS supplemented this guidance with additional guidance that states taxpayers who do not apply for forgiveness, or whose forgiveness requests are reduced or denied, may take deductions for expenses paid with the amounts that are not forgiven. (Rev. Proc. 2020-51) Source: Spidell
