Happy October to our ATKG friends and family! Ordinarily, October 15th marks the end of our traditional busy season, but, as with everything else in 2020, this year is very different. We expect this fall to be just as busy assisting our clients with their Paycheck Protection Program (PPP) loan forgiveness applications. Below is a recap of the latest news and recommendations for PPP borrowers.
New Simplified Loan Application
On October 8, 2020, the Treasury and the SBA announced a simplified loan forgiveness application, Form 3508S, for PPP loans totaling $50,000 or less. While this measure is not the “automatic forgiveness” lawmakers have been dangling over our heads all summer, PPP borrowers of $50,000 or less are exempt from any reductions in forgiveness based on:
- Reductions in full-time-equivalent (FTE) employees; and
- Reductions in employee salary and wages.
In other words, borrowers will not have to reduce their loan forgiveness amounts even if they had to reduce their workforce or cut salaries during these recent times of hardship.
Form 3508S is simpler because the application requires fewer mathematical calculations and required documents; however, borrowers are still required to provide the necessary calculation on the loan forgiveness amount. Borrowers are also responsible for filing the supporting documents to substantiate the information’s accuracy and calculation within their loan forgiveness application.
Deferral Period for PPP Loan Payments
The SBA also released guidance last week clarifying that lenders must grant borrowers a 10-month deferral period. Under the original PPP rules, borrowers were granted a 6-month deferral period before loan payments commenced. However, the PPP Flexibility Act of 2020 lengthened the deferral period to 10 months. The SBA’s new guidance can be found in Question #52 in the SBA’s Frequently Asked Questions page. Keep in mind that borrowers may submit a loan forgiveness application any time before the maturity date of the loan but must start making payments 10 months after the Covered Period ends (unless the loan is forgiven before that time).
Recap of PPP Forgiveness Applications and Timing
At this point, there are 3 PPP Forgiveness applications you can use:
- Form 3508S: For loans of $50,000 or less
- Form 3508EZ: For borrowers who are self-employed with no employees or for borrowers that have no wage or FTE reduction penalties
- Form 3508: Full form for borrowers with loans greater than $50,000 who must calculate penalties
At this point, as discussed in this previous ATKG Newsroom article, expenses paid with PPP funds are not deductible for tax purposes. Most PPP questions we have received lately concern the timing of submitting PPP loan forgiveness applications. The American Institute of CPAs recently suggested preparing the application, gathering your supporting documentation, and not submitting your application until 2021, when Congress is expected to reverse the IRS’ deductibility decision.
ATKG will be joining IronEdge Group in a joint webinar on November 5, 2020 where we will have a lively discussion on year-end accounting and IT issues. PPP will be one of our topics so we hope you will join us. Click here to register.
As always, ATKG will continue to assist you in navigating the PPP loan process should you have any questions. ATKG is committed to keeping our clients informed and will post updates to our Coronavirus Newsroom when necessary.
Carlee Gibbs began her career with ATKG as an intern in 2019. She graduated from Texas Lutheran University in May of 2020 with a master’s in accounting and a bachelor’s in business administration. While at Texas Lutheran, she volunteered with Volunteer Income Tax Assistance (VITA) – a program that aids in preparing local community members’ basic tax returns free of charge. Carlee also served as a graduate teaching assistant for accounting principles and principles of audit at the university. She was a recipient of the Texas Society of Certified Public Accountants Education Foundation scholarship – an award given to students with an exemplary GPA who are pursuing a profession in public accounting. Carlee is currently pursuing her CPA licensure.