We're committed to helping you and your members get through the Payroll Protection Program Loan Forgiveness process as smoothly as possible. We learned through the initial loan application process that your members value and appreciate honest and clear communication. In a nutshell, they want to know what you know, when you know it. As we await final instruction from the federal government as it pertains to process, procedures, and automatic forgiveness we've created this page to help formulate your Forgiveness Application strategy.
In addition to the resources posted below, we've created communication resources that you can use to help inform your PPP borrowers of important timelines, required documentation, and more. You can use these on your credit union's website, social media accounts, or emails.
The Benefits of Waiting: How Choosing to Use the 24- Week Covered Period Can Help Maximize Forgiveness
With the potential of a loan payment looming overhead, it can be tempting to rush into the PPP loan forgiveness process BUT choosing the best covered period could actually help you get more if not all of your loan forgiven. Here are some of the advantages of utilizing the 24-week covered period:
- As a proprietor with no employees or an independent contractor filing a 1040 Schedule C, the maximum loan amount that can be forgiven using an 8-week covered period is $15,385 which may be less than your PPP loan. Choosing a 24-week covered period will allow for a maximum forgivable amount of $20,833.
- If you had reductions in employee pay or wages, you will be penalized in the forgivable amount of your loan if the wages and/or the number of employees was not restored by the time you apply for forgiveness. By using a 24week covered period you are provided more time to restore these employees before applying for forgiveness.
- The process is always changing!! As you may remember from your application process, the PPP program has been a moving target since the beginning with rules and guidance are changing, what seems like weekly. Waiting to apply could potentially save you time and effort as new rules come into place for how the loans are forgiven.
- You actually have 10-months to apply for forgiveness after the last date of your chosen covered period! No need to rush.
- By choosing the 24-week covered period, you have more time to speak with advisors (CPA, payroll company, etc.) who can help you gather the appropriate documentation for forgiveness or even prepare you a professional payroll report which will help expedite your process when you are ready to apply for your loan forgiveness.
- Click here to download the Paycheck Protection Program Loan Forgiveness Application (06-16-2020) (Spanish version)
- Click here to download the Paycheck Protection Program EZ Loan Forgiveness Application (06-16-2020)
- Interim Final Rule on PPP Forgiveness can be found on the US Treasury's website for PPP resources
- Additional PPP Forgiveness resources can be found on the SBA website
Frequently Asked Questions
at least 60% of PPP must have been spent on payroll
no more than 40% includes:
- mortgage interest
Time period to use funds
8 or 24 weeks
- Borrowers who had a disbursement date of 6/5 or after can only have a 24 week covered period. Those who received their loan disbursement prior to 6/5 can choose an 8 or 24 week covered period.
Workers must be rehired by December 31, 2020
• Unable to rehire individual who was an employee on or before 2/15/2020
• Able to demonstrate the inability to hire similarly qualified employees on or before 12/31/2020
• Able to demonstrate the inability to return to the same level of business activity as before 2/15/2020
Acceptable examples include interest on a loan to finance the real estate for your primary place of business; auto loan interest on a car you own to make business deliveries; or, mortgage interest on a warehouse you won to store inventory. The Mortgage or loan must have been in place prior to 2/15/2020.
By contrast, for purposes of loan forgiveness, PPP uses the standard of “full-time equivalent employees” to determine the extent to which the loan forgiveness amount will be reduced in the event of workforce reductions.
Typically, sections 162 and 163(a) of the Code would allow for deductions for expenses paid related to (1) payroll costs, (2) any payment of interest on any covered mortgage obligation, (3) any payment on any covered rent obligation, and (4) any covered utility payment. Here, absent any further clarification, the IRS has stated they will rely on section 265(a)(1) and the applicable regulations to disallow any otherwise allowable deduction under the Code for the amount of any payment of an eligible PPP expense to the extent of the resulting covered loan forgiveness (up to the aggregate amount forgiven) because such payment is allocable to tax-exempt income. In other words, the IRS is trying to prevent a double tax benefit, i.e., receiving a deduction for spending loan proceeds that are eventually forgiven and excluded from gross income.