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On 2/22/21, President Biden announced changes to the Paycheck Protection Program. One change allows the self-employed to apply using gross income so long as they file a Schedule C.
This allows you to use the amount on, Line 1 of your Schedule C rather than Line 31 as previously allowed.
To ensure that you qualify for full forgiveness of your PPP loan, it is important to keep track of where the funds are spent. Qualifying items are payroll costs, rent/mortgage payments (provided the premises were occupied prior to receiving the funds), utilities and qualifying business expenses.
Some important conditions will also apply:
Eligible Expenses that are incurred over the 8-24 week period starting from the day you receive your PPP loan from your lender are what contribute to your forgivable amount.
At least 60% of the loan must be used for payroll related costs, e.g. gross wages, health care contributions and state taxes.
You employees headcount at the time of the application must be maintained.
You must maintain at least 75% of each employee’s total salary
For PPP loans distributed in 2020, any rehiring must have been done before 12/31/20.
Keeping accurate records of what is spent and when it is spent is required to support your PPP loan forgiveness application. There may be additional lender requirements. Good record keeping and bookkeeping will be critical for getting your loan forgiven.
If you are not approved for PPP forgiveness, there may be the opportunity to appeal with your lender. If your loan is not forgiven, any unforgiven portion will accrue interest at the rate of 1%, for the remainder of the 2-5 year period. There is no prepayment penalty.
Under the bill passed in early December 2020 by President Trump, it was stipulated that income received through the PPP will not be treated as taxable. Any expenses that were paid using the PPP funds will still be tax deductible.
Have questions about PPP and loan forgiveness? Give the professionals at Handle It a call at (833) 202-7676.