SBA’s PPP Loan Forgiveness: What You Need to Know

Late last week, the Small Business Administration (SBA) released the application which borrowers of the Paycheck Protection Program (PPP) loan need to use in order to determine the amount of their loan that may be forgiven by their lender.  The application can be completely filled out online at this link:  https://home.treasury.gov/system/files/136/3245-0407-SBA-Form-3508-PPP-Forgiveness-Application.pdf where detailed instructions are also available.  

Costs that are eligible and the calculation of them can be a cumbersome and confusing process.  In fact, already borrowers are grumbling about missing guidance as to what certain terms actually encompass and what specific categories of payroll can be included, i.e. guaranteed payments among others.  Additionally, the timing and deadlines for obligations could also perplex many small business owners who are not sure when to begin and what to include in their timelines.  

The bottom line here is that eligibility for forgiveness might not be a simple process. The planning and application that goes with a PPP loan need intricate thought and forecast to reap the full benefits.  We highly recommend that you consider working with Dallo Law Group to get you on the correct course of action.  Our team consists of both attorneys and CPAs who in combination have decades worth of intricate experience with government, tax, and law areas.  

Our founder, Michael Dallo, is himself both a CPA and tax attorney.  He has made the PPP loan program top priority and has already assisted a number of small business clients through the process with great success.  He is adamant about the fact that it is simply not enough to just arbitrarily apply for a loan.  Instead it involves a whole lot of planning and research to ensure clients get the most of the government relief that is available.  Each small business is unique and has its own special requirements in order to thrive; and therefore it is never a one-size-fits-all approach for his clients.  Furthermore, eligibility for forgiveness can also be an unwieldy endeavor which makes it important to work with an experienced professional to put you on the correct route and see you through to the end.

The Road to Simplification

Among the detailed instructions in the 11-page application document which provides forgiveness for PPP loans, includes an option that lets a small business calculate payroll costs using an eight-week covered period that aligns with its regular payroll cycles.  There is also an exemption if a good-faith, written offer to rehire workers was declined.  Other areas for consideration in loan forgiveness include non-payroll expenses, such as rent, mortgage interest, and utilities, which require a time calculation as well as categorizations for eligibility.  

The trickling of clear guidance has been slow to say the least and more is expected to come from the SBA as well as the Treasury Department, which makes it even more crucial to work with professionals that are consistently up-to-date with changes and revisions to the rules.  Another area to consider is the tax impact a PPP loan may trigger.  Namely, the IRS weighed in with guidance that applies to PPP loans; a principle which provides that expenses “allocable to tax-exempt income” are not deductible by the payor.  Thus, any expenses paid by a borrower – to the extent those amounts are ultimately forgiven by the lender on a tax-free basis – will not be deductible on the borrower’s 2020 tax return.  Naturally, borrowers should not expect to receive both a tax deduction and tax-free forgiveness; however, even in this area further updates are expected.  

All these points have us circling around again to the great importance of working with the most qualified professionals to see you through this PPP loan and forgiveness process.  There is no better team than Dallo Law Group which is a one stop shop for all your accounting and law needs.  We are confident that we can plan and guide you through a course that brings you full benefits for yourself and your business.  As always your first consultation is free and can be scheduled either at 619-795-8000 or by email at mdallo@dallolawgroup.com.  We look forward to working together.