PPP Loan Forgiveness Update

  

 There is no immediate deadline to apply for loan forgiveness. Forgiveness applications can be filed up to 16 months from the date a business received PPP loan funding.

 We suggest deferring PPP forgiveness until 2021. IRS notice 2020-32 states that the expenses paid with forgiven PPP funds will not be deductible on the taxpayer’s 2020 income tax return. Congress has indicated that this was not their intent and has pending legislation to correct the IRS’ position. However, due to the recent elections no action has been taken yet. We know that if PPP forgiveness happens in 2020 the related expenses will be non-deductible per regulations. At this time, if forgiveness is granted in 2021, taxpayers can deduct the expenses for 2020 and hope that either the IRS reverses its decision or Congress takes legislative action to correct this position by the IRS. If neither happens, then once forgiveness is granted taxpayers would be required to amend the 2020 tax returns accordingly.

 PPP loan repayments start 10 months from the end of the “covered period” unless an application for forgiveness has been submitted. The end of the covered period (24 weeks from the funding date) for most recipients is October/November 2020. This means the PPP loan repayments are scheduled to start August/September of 2021. Lenders have up to 60 days to approve your forgiveness application. Approved applications are sent to the SBA for review and funding which can take another 90 days.

 Banks in our area have already started to accept forgiveness applications or will be very soon.

With all of this in mind, we believe this is the right time to start the process for our clients. We hope to have all applications ready for submission by January 1, 2021.

 Please contact us if you have any questions or would like our help with your PPP loan forgiveness.