Is your small business eligible for PPP forgiveness? Here’s why you might want to wait
Last week, the Treasury Department announced new rules that make it easier for small businesses with paycheck protection loans under $ 50,000 to obtain forgiveness. But even with these rules, it still makes more sense to wait to ask for forgiveness.
To get started, you have 10 months to apply after your “covered period” has ended. The period covered is eight or 24 weeks from receipt of your loan, depending on the period you choose. Most of my clients have chosen the 24 week duration and as many received their PPP loans last spring, they won’t need to request a forgiveness until the end of 2021. So there is plenty of time to do the remittance. paperwork. “There really shouldn’t be any rush to get forgiveness in my opinion,” said Jacob Cohen, a certified public accountant based in Philadelphia. “I would advise waiting at least a month or two to see how the process unfolds for other businesses and if any widespread and unexpected problems arise.”
Then there’s a good chance lawmakers will pass a new stimulus bill before the end of the year. Most experts expect Washington to eventually provide new stimulus funds, although the timing is unclear. The Senate is currently considering a smaller-scale stimulus initiative that includes a stand-alone PPP invoice. House leaders remain in tense negotiations with the Trump administration over its details. While it’s likely that another round of stimulus will provide more support to businesses that still need it, the proposals all include changes to forgiveness provisions for businesses receiving up to $ 2 million in loans. Since any of these bills could create substantial changes in the forgiveness process, it makes sense to wait a moment and see how things play out.
More answers are needed. To date, the Treasury Department has posted updates, guidelines, and answers to more than 50 frequently asked questions about the Paycheck Protection Program, and yet many issues remain unresolved. For example, there are questions regarding mergers and acquisitions, how to accommodate changes in the corporate structure that have occurred during a discount period, whether the expenses used for the discount are deductible, clarification on “non-salary” expenses used in the discount calculation, and gray areas around the restoration of the employee workforce. Some forms need to be updated to catch up with any recent changes, and communications between the Small Business Administration and its member banks are still evolving.
Many bankers have only recently received forgiveness advice from the Small Business Administration, or SBA – which itself is understaffed and overwhelmed – and as a result, banks are still putting in place their procedures to handle what should be an onslaught of requests. TD Bank, headquartered in Cherry Hill, has temporarily stopped receiving any new PPP cancellation requests for loans under $ 50,000 due to this rapidly changing environment in order to accommodate recent SBA reviews. “We will be communicating with our customers once the digital application updates are complete and our loan cancellation portal is reopened,” said Jay DesMarteau, head of commercial distribution at TD Bank.
Your interest rate is only 1%. Some clients tell me that delaying their rebate request means they’ll have to pay interest on their Paycheck Protection loan – and they’re right. But the interest rate is only 1%, so even a loan of $ 50,000, if not paid off for the next ten months, would cost less than $ 500. For me, this is well below the potential costs that can be incurred as a result of an incomplete or faulty application process.
Finally, when the time comes to apply, don’t do it alone. There are now three – yes, three – forms (3508, 3508EZ, and 3508S) to request a rebate, depending on your loan amount and other factors. The rules are complicated, the process is bureaucratic, and you have better things to do with your time. Yes, there are some good tools that can help you figure out the numbers, like a helpful calculator provided by the American Institute of Chartered Accountants, for example. But in the end, you’ll want to get professional help.
“I like to think that submitting the PPP loan forgiveness application is similar to filing your annual business or personal income tax return,” said Scott Kregel of Kregel & Company, a CPA firm in Philadelphia. “There are similarities between collecting your supporting documents and reporting them on forms with summary line items. Therefore, if you usually rely on an outside professional to help you with your tax returns, I recommend that you use the services related to your PPP loan remission with them as well.
Given the challenges that many of us face this year as a result of this unprecedented economic downturn, the right thing to do is to focus on our business and not get caught up in a forgiveness that is still incomplete and complex. . process which will probably take us longer and create more headaches to complete. So, are we going through 2020? Then we can focus on this task once this year is behind us.