PPP Loan Update

Written by Matthew Dickens on January 14, 2021. Posted in General

PPP LOAN UPDATE –

If you applied for and received a PPP loan, the original bill created by Congress inadvertently made the proceeds taxable. GOOD NEWS – The new bill recently signed into law, called the Consolidated Appropriations Act, corrected the original bill by clarifying that a forgiven PPP loan will NOT be counted as taxable income.

The new bill also created a simplified application for forgiveness. If your PPP loan amount was under $150,000, a new form will be available that allows you to self certify that you have met all of the requirements necessary for full forgiveness. You, the loan recipient, are still responsible for all of the supporting documents in case of an audit, but you will not be required to submit that documentation at the time of application. Application for forgiveness must be submitted within 10 months of the end of your covered period. Please note – The application is filed with your lender, not as part of your tax return.

Under the original bill, PPP loan forgiveness was required to be reduced by the amount of any EIDL grant received. In other words, you would have been required to repay your PPP loan to the extent of any EIDL grant received, even if you qualify for full forgiveness. The new bill removed that requirement so that you could receive full forgiveness even if you received an EIDL grant. If you already applied for forgiveness and your forgiveness amount was reduced by the amount of an EIDL grant you received, please contact your lender immediately to discuss how to go about amending your application.

In addition, due to a retroactive change by the new bill, employers who received an original PPP loan can now also apply for the employee retention credit. To be eligible for the 2020 employee retention credit, the employer must:

1. Be able to show that their gross revenue dropped by at least 20% during any calendar quarter in 2020 compared to the same calendar quarter in 2019 or;
2. Be an employer whose business is fully or partially suspended by a government order related to COVID-19 during the calendar quarter.

For 2020, this credit can provide up to $5,000 per employee. Please note – This credit must be claimed on form 941 as part of your quarterly payroll filings. In addition, if you feel you qualify for this credit, it is important to specifically allocate which expenses you claim for PPP Loan forgiveness and which expenses you claim for the employee retention credit. You CANNOT use the same expense for both purposes. 

Lastly, the new bill also created a new round of funding for initial and second PPP loans. Individuals who received a PPP loan under the original bill are eligible to apply for second loan providing they meet all of the following criteria.

1. Be able to show that their business’s gross receipts dropped by at least 25% during any calendar quarter in 2020 as compared to the same quarter in 2019. Alternatively, as long as your total income for 2020 is down 25% when compared to 2019, you will qualify.
2. Employ no more than 300 employees per physical location.
3. Have already used 100% of their initial PPP loan.

If you need assistance applying for a PPP loan, PPP loan forgiveness or think you may qualify for the employee retention credit and would like our help, please contact us immediately to setup an appointment.