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How to Receive PPP Loan Forgiveness
Dear Valued Clients and Friends,
On August 4, 2020, additional guidance was released by the U.S. Small Business Administration (SBA) on loan forgiveness issued under the Paycheck Protection Program (PPP).
Windes has outlined a few of the major changes issued by the SBA regarding PPP loan forgiveness below. View the SBA's updated Frequently Asked Questions (FAQs) on PPP loan forgiveness here.
How Windes can help with PPP Loan Forgiveness
General PPP Loan Forgiveness for Self-Employed Individuals
The SBA has clarified that independent contractors, sole proprietors, and self-employed business owners who did not have employees when applying for a PPP loan may receive forgiveness by using the PPP Loan Forgiveness Application Form 3508EZ.
Retirement Contributions are Not Included in the Compensation Limits for Business Owners & Employees
The new guidance clarifies that employer retirement contributions made for business owners and employees will not be included as compensation when determining PPP loan forgiveness eligibility. A portion of retirement contributions paid for by a PPP loan may be forgiven. The maximum amount of retirement contributions eligible for PPP loan forgiveness is 20.883% (2.5 months/12 months) of each employee or business owner’s total 2019 retirement contributions.
Forgiveness is Not Allowed for Accelerated Health Benefits
PPP loan forgiveness is not provided for accelerated payments of health benefits. This means that, for example, you may not prepay any amount of health insurance premiums that fall outside of the “covered period” applicable to your PPP loan. The payment of health benefits that are “accelerated” outside of the covered period are not eligible for PPP loan forgiveness.
Not All Payments of Interest are Forgivable
The SBA has clarified that PPP loan proceeds used to pay interest on unsecured debt is not forgivable. Unsecured debt includes loans that are not secured by real or personal property, such as a line of credit or a credit card. PPP loan proceeds may be used to pay for interest on secured debt from mortgages, equipment, or other real property, and are eligible for forgiveness.
Are Travel Expenses Forgivable?
Per prior SBA guidance, only self-employed individuals (Schedule C filers) may receive loan forgiveness on payments of gas used to drive a business vehicle. Notwithstanding the exception for gas payments used for business vehicles owned by self-employed individuals, the new guidance has narrowed the definition of a forgivable “transportation cost” as being limited to any fee assessed by a state or local government for the distribution of utilities. This implies that travel related expenses are not forgivable unless you are transporting utilities and are assessed a tax by the government.
For information about how Windes can support you with your loan forgiveness calculations and/or be a resource to you to answer your specific questions, click here.
Sincerely,
Guy A Nicio, CPA, MST
Partner - Chairman
Tax & Accounting Services
gnicio@windes.com
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