- If you have not yet already done so, you may want to get your PPP loan forgiven in 2020.
- The process is fairly simple. Contact your lender to learn more.
- There are tax implications from forgiveness, so contact your tax lawyer or CPA to discuss.
Last week, we discussed some tasks that commercial property owners may want to get completed before the end of 2020. If you missed that article, please go here to catch up.
What we failed to mention, though, was what to do about your SBA Paycheck Protection Program (“PPP”) loans. Undoubtedly, many of your businesses received these loans in the first or second round earlier this summer. The next step, of course, is to apply for forgiveness of the loan. Borrowers can submit a forgiveness application at any time before the maturity date of the loan. However, if they do not submit it within 10 months after the last day of the borrower’s loan forgiveness covered period, loan payments are no longer deferred and the borrower must begin making payments on that loan.
So, if you have not applied for forgiveness yet, how do you do it? And should you do it before the end of the year? We will address those and other questions in this blog entry.
How to Apply for Forgiveness
The first step you should take when applying for forgiveness is to contact your lender. It may have particularly procedures or forms that it wants you to fill out to get the loan forgiven.
From the SBA’s perspective, the forgiveness process is fairly simple. There is a 2 page application that you have to fill out and submit to your lender. It does require you to show the amount you received and how that money was used – i.e., that the majority went to payroll. But if you can show that, then SBA should approve your application for forgiveness.
Should You Seek Forgiveness in 2020
Now that we know how to apply for forgiveness – should you do it in 2020? We are not a tax law firm, so I am not going to give you advice as to whether you should seek forgiveness in 2020 or 2021. I will just say you should consider the tax ramifications of forgiveness and discuss with your tax lawyer and/or CPA. It is my understanding that, once the government forgives your loan, that money becomes income to your company. So it is worth considering whether you want to seek forgiveness in 2020 or 2021.
There is one more potential consideration for when you should seek forgiveness. Its very possible that there will be another stimulus plan passed by Congress in the next couple of months. One potential benefit of that stimulus could be a waiver of the forgiveness process – at least for loans under a certain amount. This has been talked about before.
Its not clear that Congress will pass this, but it is possible.
If you need any more information on PPP loans and their forgiveness, please call us at 512-614-0335.