05 Oct 2020 Oct PPP Loan Forgiveness Update
October 5, 2020 – The SBA’s PPP loan was likely a lifesaver to your business, and the next step is to apply for loan forgiveness with the bank that processed the PPP loan. The deadline to apply for forgiveness has been extended and is now 10 months after the end of the applicable loan “covered” period of 8 or 24 weeks. You may be ready to submit the loan forgiveness application so that you can receive confirmation of loan forgiveness and not worrying about whether you’ll be on the hook to repay the loan. While it would be nice to have the loan forgiveness in the bag, we recommend waiting to submit your loan forgiveness application to the bank:
1. The SBA is receiving loan forgiveness applications from banks, but not processing them. Even if you submit the application now, you will be waiting for the approval. This could take several months if the SBA doesn’t start processing the applications soon. (Note: We heard reports late last week that the SBA may begin processing loan forgiveness applications due to pressure from outside sources.)
2. Many banks are not ready to take forgiveness applications at this time. Many questions remain and banks are reluctant to take applications when they aren’t sure what the endgame looks like.
3. The SBA has hinted it may issue further guidance relating to PPP loan forgiveness, so we are waiting for more details.
4. Congress is still in session and that means anything could still happen. The past few months have shown that the rules for the PPP loans can change at any moment – sometimes for better, sometimes for worse.
Haynie & Company is here to help you with the loan forgiveness process as more information from the SBA and Congress becomes available. We’ll contact you as soon as the coast is clear to submit the application to the bank for loan forgiveness.
(Please be aware that current SBA rules require that a grant from emergency loan funds (EIDL) are deducted from the PPP loan forgiveness amount. If you have questions about this or any PPP details, please contact us.)
The CARES Act says that PPP Loans are nontaxable. However, the IRS has said that expenses paid by a Forgiven PPP Loan are not deductible for tax purposes. This is to prevent a double tax benefit. In Congress, key taxwriters intend to pass a measure allowing deductibility of expenses. Until Congress acts, businesses are stuck with the IRS guidance.