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If your business is among the thousands that received funds through the Paycheck Protection Program (PPP), now is the time to begin the loan forgiveness process. As the 24-week Covered Period ends, banks and other lenders are gearing up for an onslaught of businesses seeking PPP loan forgiveness. PYA’s PPP Overwatch Program offers flexible, scaled solutions to help you through the process.
Applying for PPP loan forgiveness can be complicated. Business owners have a lot on their plates and may be unaware of all the details and documentation requirements—missing opportunities and risking unnecessary repayment.
For example, below is a summary of just a few key considerations. Please see our full article on this topic.
Did You Know?
Amounts Eligible for Forgiveness
The PPP Flexibility Act of 2020 (PPPFA), signed into law June 5, 2020, extended the Covered Period for loan forgiveness purposes and decreased the percentage of loan proceeds that must be used toward eligible payroll costs. This increases the amount of qualifying expenditures a Borrower can incur. However, specific tests as part of the PPP may still impact the forgiveness calculation, resulting in a possible reduction in the amount forgiven.
Year-End Planning Considerations
A critical consideration when applying for PPP forgiveness is year-end planning. A significant benefit of the CARES Act, apart from the infusion of cash at a much-needed time in the life of a business, is that any PPP loan proceeds ultimately forgiven by the lender are not considered taxable income on the Borrower’s applicable tax return. This is contrary to the normal treatment of cancellation of debt income.
A Deduction Concern
The IRS has taken the position that expenses paid with funds received from the PPP will not be deductible on the Borrower’s applicable income tax return for the year. For example, if the Borrower paid $500,000 in payroll costs during 2020 with funds it received from the PPP and received forgiveness for those loan proceeds, none of those expenditures would be deductible on the Borrower’s 2020 federal income tax return.
As these examples highlight, when it comes to seeking loan forgiveness, one size does not fit all. PYA’s PPP Overwatch Program is tiered to give you only what you need, with our professionals at your side at every step. PYA offers a menu of options for PPP loan forgiveness services—view the membership matrix below, and contact one of our PYA executives to get started.