Small businesses who received Paycheck Protection Program Loans got some good news this week, and may want to hold off on applying for forgiveness for a few weeks due to the stimulus bill signed into law over the weekend creating two important changes to existing PPP Loans.
First, the bill overturns a piece of IRS guidance that disallowed a deduction for any expenses used to calculate loan forgiveness. This guidance had essentially undermined Congress’ intent that loan forgiveness would be nontaxable, and is now null and void. Second, the bill extended a simplified forgiveness procedure for recipients of loans of $150,000 or less. It requires the SBA to issue a new form, within 24 days (i.e., by late January), that essentially only requires applicants to list the number of employees they were able to retain after receiving the loan, and self-certify that the loan was used for qualified purposes. This significantly eases the calculations and documentation many small businesses were struggling with.
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