The Paycheck Protection Plan (PPP) Loan burst into the scene in March 2020 when Congress passed the CARES Act, which was subsequently signed into law by President Trump.
The PPP loan program was then changed a dozen or more times by the SBA, IRS and Treasury Secretary Mnuchin.
And now there are more changes. In this blog, we’re going to talk about the new loan forgiveness form and the changes when you get your loan forgiven, based on the December 2020 new CoronaTax bill.
There are now TWO possible PPP loans. PPP1 is the original loan, which has been restarted. And PPP2 is a different type of loan, available if you’ve already taken and used a PPP1 loan and if you meet other criteria.
Both have the same forgiveness guidelines, provided you spend the money in accordance with the rules.
PPP Acceptable Costs for Forgiveness UPDATED!
The following are acceptable costs:
Covered mortgage interest,
Worker protection and facility modification to comply with COVID-19 health & safety guidelines,
Covered property damage costs related to damage and vandalism from public disturbances in 2020 that were not covered by insurance or other compensation,
Supplier costs that are essential at the time of purchase to the borrower’s current operation, and
Operating expenditures for business operation, payroll processing costs, human resources costs, sales and billing, accounting for inventory, records and expenses.
PPP borrowers have to spend at least 60% of the funds on payroll over a covered period of 24 weeks. (A period of 8 weeks was allowed if you received a loan earlier on)
There are limitations on the amount of payroll paid to owners.
Besides the additional expenses now allowed, there are new rules that have simplified the forgiveness process.
Simplified Forgiveness Form
PPP loans of $150,000 or less now qualify to use a new forgiveness form. It’s just one page long and covers the number of employees the borrow was able to keep on payroll, the estimated total spent on payroll and the total loan amount.
You will not need to include additional materials, unless there are unique circumstance due to statutory or regulatory requirements.
The SBA has until January 20, 2021 to create the simplified form.
Your Best PPP Strategy
My suggestion is to wait to file for forgiveness. Wait for the new form. But, get your record keeping together so you have good information.
Best News of All from the New Law
The PPP forgiven loan will not be taxable. It will not increase your taxable income and it will not reduce your deductions.
It is completely tax free. Previously, the IRS and Treasury Sec Mnuchin had said that the forgiven loan would reduce deductions. In the last law Congress was very clear in saying that was not the case.
This is great news!
Make sure you keep up to date with the latest in tax law. There is a lot changing right now. Follow along with the blogs at USTaxAid.com and the Monday Livestream sessions on Facebook’s Diane Kennedy’s US Tax Group.