PPP Loan Forgiveness

PPP Loan Forgiveness

Businesses are now eligible to apply for forgiveness of loans received through the federal Paycheck Protection Program (PPP) established under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. PPP loan recipients should be thoughtful in responding to information requested by lenders and the Small Business Administration (SBA).

As borrowers prepare, certify, and submit hundreds of thousands of PPP loan forgiveness applications, PPP loan recipients need to be aware of and assess various risks they face in this process. The U.S. Department of Justice and U.S. Small Business Administration are reviewing and investigating all violations of the PPP. In particular, the SBA plans to review all loans of more than $2 million.

McGlinchey is well situated to advise PPP borrowers on potential pitfalls in the loan forgiveness application process and provide recommendations for avoiding potentially serious legal jeopardy in the face of investigators’ and prosecutors’ scrutiny. Contact our team to get started.

SBA PPP loan forgiveness materials

what is the paycheck protection program?

The links below collect PPP guidance from the U.S. Treasury Department. Please review the application and guidance carefully to ensure you are utilizing or relying on the most current information.

are forgiveness applications open?

Yes! The SBA is currently taking applications, however, you must first apply to your lender.

when should I apply for forgiveness, and what is the timeline?

  • A business submits its application for forgiveness to its PPP lending institution.
  • The lender has 60 days to make a determination on the application and submit a recommendation for forgiveness to the SBA.
  • The SBA has 90 days to review the request.
  • The SBA will send borrowers who received more than $2 million a supplemental questionnaire to guide its decision.
  • Upon receipt of the questionnaire, the business only has ten business days to return the supplementary documentation to the SBA.

when is the deadline to file for PPP forgiveness?

Borrowers may submit a loan forgiveness application any time before the maturity date of the loan, which is either two or five years from loan origination.

what does the forgiveness application process entail?

Borrowers who received more than $2 million will receive a supplemental questionnaire to guide the SBA in consideration of forgiving the loan. The form aims to validate that your loan was spent on permissible expenses and reaffirm the necessity of the funding at the time of your loan application, in the form of documents evidencing financial need.

what are the risks if my loan is not forgiven?

The risks to borrowers if the request for forgiveness is denied include having to repay the loan, as well as possible fines and civil or criminal sanctions.

reductions in your forgiveness amount (examples)

The CARES Act requires borrowers to reduce the amount of the PPP Loan which may be forgiven if, under certain circumstances, the salary or hourly wages of the borrower’s employees are reduced.  The application adds further details to this reduction calculation and process.

Insights

COVID-19 Updates

Shuttered Venue Operators Grant Program

April 9, 2021

In the next few days, the Small Business Administration (SBA) will open the application process for the Shuttered Venue Operators Grant (SVOG). Eligible applicants may qualify for grants equal to 45% of their gross earned revenue, with the maximum amount available for a single grant award of $10 million.

Event

Webinar: What to know about PPP loan forgiveness

February 18, 2021

You certified your eligibility for the PPP loan, calculated the amount of your loan, and submitted your application. You used the loan proceeds for allowable purposes. Now, the time has come to calculate the amount to claim in your Loan Forgiveness Application. But is there a “right” way to do it?

Alert

Pitfalls of PPP Loan Forgiveness

January 25, 2021

Businesses are now eligible to apply for forgiveness of loans received through the federal Paycheck Protection Program (PPP) established under the CARES Act. PPP loan recipients should be thoughtful in responding to information requested by lenders and the Small Business Administration.

Alert

IRS Acknowledges Congressional Reversal on Deducting Eligible PPP Expenses

January 6, 2021

In a previous alert (Yes, I Can Deduct Expenses Paid with a Forgiven PPP Loan) we reported that the Consolidated Appropriations Act, 2021, which contains The COVID-related Tax Relief Act of 2020, specifically provides that “no deduction shall be denied, no tax attribute shall be reduced, and no basis increase shall be denied, by reason of the exclusion from gross income” of a PPP loan. Today, the Internal Revenue Service issued Revenue Ruling 2021-2, which reflects this change in the law.

Alert

Yes, I Can Deduct Expenses Paid with a Forgiven PPP Loan

December 31, 2020

Congress Reverses IRS Congress has overridden the IRS position that expenses paid with PPP loan proceeds cannot be deducted if the PPP loan is forgiven. In our November 20, 2020, alert captioned “Can I Deduct Expenses Paid with a PPP Loan?” we addressed Revenue Ruling 2020-27 in which the IRS expanded on its original positionMore

Alert

Can I Deduct Expenses Paid with a PPP Loan?

November 20, 2020

In recently released Revenue Ruling 2020-27, the IRS addressed the following two fact patterns. As set forth in the two fact patterns, the IRS has now ruled that no deduction is allowed in either situation because each taxpayer reasonably expects that she will be reimbursed (via forgiveness of the PPP loan) for the Covered Expenses paid or incurred. The fact that one taxpayer will not file her application for loan forgiveness until 2021 is irrelevant.

Alert

IRS Announces Form 1099-C Not Required for PPP Loan Forgiveness

September 22, 2020

IRS Announcement 2020-12 notifies lenders that they should not file IRS Form 1099-C with the IRS or furnish it to borrowers to report the amount of qualifying forgiveness with respect to covered loans made under the Paycheck Protection Program (PPP).

Alert

Is 1099-C Required for Lenders on Forgiven PPP, EIDL Funds?

June 17, 2020

To address the adverse economic consequences to businesses and employees caused by the coronavirus, the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) was enacted. It amends Section 7 of the Small Business Act to provide a new type of loan to small businesses. This is the Paycheck Protection Program (PPP) loan (SectionMore

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