As we continue to navigate the challenges and uncertainties of the COVID-19 pandemic and the ongoing economic crisis, know that Padgett is working closely with the IRS, the U.S. Treasury Department, Congress, and other government agencies and member organizations to get you the very latest news regarding loan forgiveness for the Paycheck Protection Program. We have assisted nearly 900 small business owners obtain more than $58 million in funds, and we are now focused on helping business owners with the ins-and-outs of the loan forgiveness process.
The rules and regulations for PPP are changing quickly, and, while we anticipate additional guidance in the coming weeks, let us keep you in the know during this difficult time.
For instance, did you know you could be eligible for a simplified loan forgiveness application, called an EZ form that is only two pages? This option might be a great fit for sole proprietors with no employees. However, sole proprietors must deal with the salary replacement limitation.
Additionally, did you know that expenses paid with forgiven PPP loan funds are not deductible? This is important as you begin considering estimated tax payments and cash flow planning, making it especially tricky for fiscal year taxpayers. Lenders have 60 days to review the application, then the SBA has 90 days to determine if the loan is forgiven. As a result, taxpayers who will need to file returns or extensions before SBA gets back with the status of their loans will face challenges.
As you may know, rather than eight weeks, recent changes to PPP enabled borrowers to have up to 24 weeks before beginning the loan forgiveness process. However, those that received their PPP loan before June 5th have the option to choose between the original eight-week period or the new 24-week period of time. We also have been given guidance that you must submit your application no later than 10 months after the covered period ends. More importantly, guidance states that you can apply earlier if you have met the payroll and other expenses qualifiers for loan forgiveness.
Given the volume of loans distributed via PPP and the potential for a backlog in processing loan forgiveness applications toward the end of the year, it likely is best if you or your business opt to use the eight-week covered period to pay back your loans.
We also have additional clarification on the documentation required to meet the safe harbor associated with the reduction of FTE. While a “good faith effort” is still needed, the borrower must provide a written offer to rehire an individual, a written record of the offer’s rejection, and a written record of efforts to hire a similarly qualified individual. Employers also must notify the state unemployment office of any employee’s rejected rehire offer within 30 days. Borrowers are exempt if they are able to document in good faith an inability to return to the same level of business activity due to compliance with certain organizations, including the CDC and state or local governments.
There are countless other updates related to PPP as well, and Padgett is committed to working with our clients so they can get the most reliable, most up-to-date information related to the PPP loan forgiveness process. Let us know how we can help!