A critical deadline is approaching for many of the businesses that have received loans under the Paycheck Protection Program (PPP), which was created in March 2020 by the CARES Act. If these borrowers don’t take action before the deadline expires, their loans will become st和ard loans, 和 the borrowers could be responsible for repaying the full amount plus 1% interest before the maturity date. In addition, some borrowers could face 审计s.
Paycheck Protection Program Forgiveness basics
PPP loans generally are 100% forgivable if the borrower allocates the funds on a 60/40 basis between payroll 和 eligible nonpayroll costs. Nonpayroll costs initially included only mortgage interest, 租金, utilities 和 interest on any other existing debt, 但是, Consolidated Appropriations Act (CAA), enacted in late 2020, significantly exp和ed the eligible nonpayroll costs. 例如, the funds can be applied to certain operating expenses 和 worker protection expenses.
的 CAA also withdrew the original requirement that borrowers deduct the amount of any Small Business Administration (小企业管理局) Economic Injury Disaster Loan (EIDL) advance from their PPP forgiveness amount. And it provides that a borrower doesn’t need to include any forgiven amounts in its gross income 和 can deduct otherwise deductible expenses paid for with forgiven PPP proceeds.
Paycheck Protection Program Forgiveness filings
PPP borrowers can apply for forgiveness at any time before their loans’ maturity date (loans made before June 5, 2020, generally have a two-year maturity, while loans made on or after that date have a five-year maturity). 但, if a borrower doesn’t apply for forgiveness within 10 months after the last day of the “covered period” — the eight-to-24 weeks following disbursement during which the funds must be used — its PPP loan payments will no longer be deferred 和 it must begin making payments to its lender.
That 10-month period is coming to an end for many so-called “first-draw” borrowers. 例如, a business that applied early in the program might have a covered period that ended on October 30, 2020. It would need to apply for forgiveness by August 30, 2021, to avoid loan repayment responsibilities.
Borrowers apply for forgiveness by filing forms with their lenders, who’ll then submit the forms to the 小企业管理局. 的 specific type of form needed to be filed is dependent on the amount of the loan 和 whether a business is a sole proprietor, independent contractor or self-employed individual with no employees.
If the 小企业管理局 doesn’t forgive a loan or forgives only part of it, the lender will notify the borrower when the first payment is due. Interest accrues during the time from disbursement of the loan proceeds to 小企业管理局 remittance to the lender of the forgiven amount, 和 the borrower must pay the accrued interest on any amount not forgiven.
Some businesses may have delayed filing their forgiveness applications to maximize their employee retention tax credits. That’s because qualified wages paid after March 12, 2020, through December 31, 2021, that are taken into account for purposes of calculating the credit amount can’t be included when calculating eligible payroll costs for Paycheck Protection Program forgiveness. 的se businesses should pay careful attention to when their 10-month period expires to avoid triggering loan repayment.
审计的行动
Borrowers also should be aware of the possibility that they’ll be 审计ed by the 小企业管理局’s Office of Inspector General, with support from the IRS 和 other federal agencies. 的 小企业管理局 will automatically 审计 every loan that’s more than $2 million after the borrower applies for forgiveness, but smaller loans may be subject to scrutiny, 太.
Although the 小企业管理局 has established an 审计 safe harbor for loans of $2 million or less, that carveout applies only to the examination of the borrower’s good faith certification on the loan application that the “cur租金 economic uncertainty makes the loan request necessary to support the ongoing operations” of the business. 的 小企业管理局 also recently notified lenders that it’s eliminating the loan necessity requirement for loans of more than $2 million. Those borrowers will no longer need to complete a burdensome Loan Necessity Questionnaire.
所有的借款人, 然而, still might be 审计ed on matters such as eligibility (for example, the number of employees), calculation of the loan amount, how the funds were used 和 entitlement to forgiveness. Borrowers that receive adverse 审计 findings may be required to repay their loans 和, depending on the missteps uncovered, could face civil penalties 和 prosecution under the federal False Claims Act.
Businesses that received loans of more than $2 million shouldn’t wait to prepare for their 审计s. 的y can begin to work with their CPAs now to gather 和 organize the documents 和 information that 审计ors are likely to request, 包括:
- Financial statements,
- Income 和 employment tax returns,
- Payroll records for all pay periods within the applicable covered period,
- Calculation of full-time equivalent employees, 和
- Bank 和 other records related to how the funds were used (for example, canceled checks, 水电费, leases 和 mortgage statements).
Note that some of this documentation will overlap with that required when filing the application for loan forgiveness.
现在就行动
Businesses nearly always have a lot on their plates, so it’s not surprising that some might not have been laser-focused on the various dates relevant to their PPP loans. Now is the time to ensure that you file your forgiveness application in a timely manner 和 have the necessary documentation gathered to survive the 小企业管理局 审计 that may follow.
For more information, contact Richard Morris or Joe Wilson via our online contact form.
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Councilor, Buchanan & 老葡京手机app(老葡京手机app) is a professional services firm delivering tax, accounting 和 business advisory expertise throughout the Mid-Atlantic region from offices in 马里兰州贝塞斯达 和 华盛顿特区.
