Exciting, late-breaking news for PPP forgiveness

Updated 12/30/2020

We’ve got some exciting, late-breaking news that might make a big impact on your financial outlook in 2021.

Congress has just enacted a COVID-19 relief bill that smooths the path forward to Paycheck Protection Program loan forgiveness. If your business or you (as a freelancer, self-employed worker, sole proprietor, or independent contractor) received a PPP loan this year to help keep your business afloat, you’ve probably been concerned about whether you’ll have to pay it back.

Banks and accountants have waited for government guidance—but let’s just say the rules have been in flux.

Now, with this new legislation, there is a clear set of instructions to rely on as we move into 2021.

Good News #1

There is a new, simplified, one-page forgiveness application for all loans of $150,000 or less. No back-up documentation is required—and the form should be available by the end of January 2021. You’re just required to initial a few representations and then sign. That’s it.

Good News #2

No matter what form you use to apply for forgiveness, all payroll and other business expenses that you claim will ALSO BE DEDUCTIBLE on your business tax return (or personal return if you’re self-employed). This is in direct contrast to guidance we received earlier in the year and it’s great news for taxpayers.

Good News #3

If you received an Economic Injury Disaster Loan or Advance (EIDL), it doesn’t count against your PPP loan forgiveness. Previous versions of the rules said the opposite, so this is also a welcome benefit to loan recipients.

Good News #4

If your PPP loan is forgiven, the amount of that forgiveness will not be added to your income and taxed. For a forgiven loan, the scenario goes like this: You got the loan, it was forgiven, it will not be taxed. Period.

Remember—the Small Business Administration still must approve forgiveness of your loan. If you received a PPP loan, you’ve got to stay on top of turning in your forgiveness application. If you’ve already turned in a forgiveness application, these new rules will be retroactively applied to your situation.

The government is acknowledging that 2020 hasn’t been a picnic for anybody—they’ve listened to what businesses need and have stacked the cards more in favor of business owners now.

If you have questions or need guidance, don’t hesitate to ask—the team at Brockway, Gersbach, Franklin & Niemeier are keeping track of real-time changes in the law and know just how to help.