What to Consider if You are Applying Early for PPP Loan Forgiveness
In last week's blog, we discussed what it would mean for small businesses participating in the Paycheck Protection Program to extend their PPP covered period from 8 weeks to 24 weeks, and how that would affect the loan forgiveness procedures. New guidance has been released that allows PPP recipients to
apply for loan forgiveness before their covered period ends, but doing this may
result in a portion of the loan proceeds not being forgiven.
In the calculations for forgiveness, there is a reduction in
the loan forgiveness amount if you reduce any employee’s wages by more than 25%
during the covered period. However, if wages are restored by December 31,
there is a safe harbor to avoid reductions in the loan forgiveness. If
you apply early for forgiveness you may forfeit this safe harbor.
Below is an example of how the calculations work. Using a 24-week period, in this example the total decrease in wages that is in
excess of the allowed 25% is $3,600. You would list the wage reduction
for this employee as $3,600. If wages are not restored, your loan
forgiveness may be reduced by $3,600. If you apply for forgiveness before
the covered period ends, you must include the wage reduction for the full 24
week period.
If you wait until the 24 week period ends and you did
restore wages by December 31, you have left money on the table by applying for
forgiveness early. If you have any questions about how these guidelines affect your loan forgiveness abilities, please give us a call at Wilson Toellner CPA.
We understand that while this program has been a blessing to many small businesses, it can be difficult to understand all of the regulations and guidelines that go along with it. Our CPAs in Central Missouri want to help you however we can. Again, if you have any questions on any of this, please give us a call. Our phone numbers are listed below. We are constantly posting relevant updates in regard to your taxes, PPP, Loan Forgiveness and so much more on our social media platforms. Be sure to follow us on our social media platforms listed below to stay up to date on the latest information.
We understand that while this program has been a blessing to many small businesses, it can be difficult to understand all of the regulations and guidelines that go along with it. Our CPAs in Central Missouri want to help you however we can. Again, if you have any questions on any of this, please give us a call. Our phone numbers are listed below. We are constantly posting relevant updates in regard to your taxes, PPP, Loan Forgiveness and so much more on our social media platforms. Be sure to follow us on our social media platforms listed below to stay up to date on the latest information.
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