SwenAssurePPP - January 11, 2021 Update
The Small Business Administration (SBA) and the Internal Revenue Service (IRS) have provided further guidance on the COVID-related Tax Relief Act of 2020 signed into law on December 27, 2020 affecting the Paycheck Protection Program (“PPP”). Highlights since our last update on December 15th update are as follows:
New legislation reversed previous guidance provided by the Treasury Department and the IRS. Specifically, expenses used for PPP forgiveness will be deductible for tax purposes in the taxable year in which the expenses were paid or incurred. Also, PPP loan forgiveness amounts will not be reduced for EIDL Advances.
A second round of PPP loans (“PPP2”) will be available o first-time borrowers and to businesses that participated in the first round for loans of up to $2 million if they:
- Have 300 or fewer employees,
- Have used or will use the full amount of their first PPP loan, and
- Have a gross receipts (following your revenue recognition method) decline of at least 25% in any 2020 quarter compared to the same quarter in 2019.
Additional provisions of the new program include: Specifically, expenses used for PPP forgiveness will be deductible for tax purposes in the taxable year in which the expenses were paid or incurred. Also, PPP loan forgiveness amounts will not be reduced for EIDL Advances.
- New borrowers can have up to 500 employees if eligible for other SBA 7(a) loans
- Loan amount still based on 2.5 times average monthly payroll costs, but restaurants and hotels (NAICS Code starting with 72) can use 3.5 times
- Participation eligibility expanded to now include 501(c)(6) business leagues, chambers of commerce, destination marketing organizations, and others
- Proceeds still used for payroll related (at least 60%) and other eligible costs, and some additional costs have now been designated as allowable including worker protection and other costs to comply with COVID-19 guidelines
- Can select a Covered Period that is between 8 and 24 weeks
- Similar documentation requirements plus evidence for decline in gross receipts
- Shortened forgiveness form and documentation requirements for loans up to $150,000
To ensure funding is available, early application is encouraged using just released Form 2483 (first-time borrowers) or Form 2483-SD (second draw borrowers). Depending on the institution, the window opens later this week through March 31, 2021.
Forgiveness is not guaranteed and must ultimately be approved by the Small Business Administration.
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