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Paycheck Protection Program (PPP) Forgiveness and Deductible?
With the new Covid Relief Bill, we’ve got some big changes to the Paycheck Protection Program forgiveness and deductibility:
Paycheck Protection Program Forgiveness Changes
There are simplified forgiveness applications for loans up to $150,000.
The application requires:
- Number of employees the borrower was able to retain because of the covered loan
- Estimated total amount of the loan spent on payroll costs
- Total loan amount
It needs to Include attestation of complied with loan requirements and to keep on hand loan documents and support of funds used (minimum 4 years). The Act does not alter the documentation that a borrower with an initial draw PPP loan of more than $150,000 is required to submit with its PPP loan forgiveness application. Borrowers can also now choose a covered period that is between 8 and 24 weeks. The covered period for all PPP loans extends through 3/31/2021.
This flexibility for new PPP loans may enable PPP borrowers to better manage their workforce decisions by tailoring their covered periods to end before a reduction in workforce, thereby avoiding a potential FTE Reduction to the loan forgiveness amount.
PPP Tax Deductibility
Prior to this new bill, PPP expenses were considered not tax deductible, causing major issues with the potential for small businesses unable to pay their tax bill. With the new tax bill, it states deductions for PPP expenses are considered allowable. In addition, PPP forgiveness income will not be considered taxable. This will be retroactive to the date of enactment of the CARES Act, March 27, 2020.
It’s very important that you properly document these PPP transactions to ensure full deductibility and forgiveness.
Do you want us to review your specific situation to ensure you’re covered?
Are you struggling to find Financial Guidance during the COVID-19 hardship?
We’ve been helping clients with disaster relief, survival budgeting, and cash management plans since March!
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