finance
Update : PPP Forgiveness and Important 2020 Tax Considerations
by Jeramy Smith , CPA
As with all things PPP related this year , Congress and the IRS have continually changed and updated aspects of this program . Therefore , the information contained here is likely to change , so consult with your tax advisor and banker about your specific PPP loan to assure you have the latest information .
Why should you wait to submit your application for PPP forgiveness ?
Many banks and financial professionals are encouraging businesses to wait until the fall to begin applying for forgiveness in hopes that the process will be simplified .
Because of the multitude of options and requirements to receive PPP forgiveness , the application process looks to be a cumbersome and confusing process for many dental practices . The practice must not only spend the funds on the correct types of expenses , but must pay those funds out within a specific time period ( of which there are multiple periods to select from ) and must maintain employment levels or eliminate employment reductions by a specific date ( of which there are options and also exceptions available in some situations .)
While the forgiveness application forms , and even a simplified EZ version , have been released , there has been discussion in Congress about further simplifying the forgiveness process for smaller loans . If this were to happen , it could reduce the work required for the smaller loans to possibly a one-page form where the taxpayer simply certifies that funds were spent properly .
For example , the bipartisan Senate Bill S . 4117 – Paycheck Protection Small Business Forgiveness Act introduced on June 30 , 2020 , proposed a one-page form for loans that are not more than $ 150,000 . Proponents of the bill claim that this would cover 85 % of the PPP borrowers , but only 26 % of the actual amount loaned out to all businesses .
This bill would significantly reduce the requirements for smaller businesses and significantly reduce the costs that small businesses would need to incur to get the needed assistance to properly complete the forgiveness applications . In general , this should cover most dental practices with collections of less than $ 2.4 million .
Because further simplification may still be coming from Congress , many in the financial community recommend that most businesses delay starting the forgiveness application process for now .
What are the basics of loan forgiveness ?
Assuming that Congress passes no further simplification , here are the basics of loan forgiveness :
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