Is the PPP loan forgiveness taxable?
Under the CARES Act, the forgiven loan amount is not included in your taxable income, so you won’t pay taxes on the money you receive. The goal of the loans was not to create a tax burden for businesses receiving the funds.
How do I Apply for PPP Loan Forgiveness?
Applying for PPP loan forgiveness starts with using the right application because there are several to choose from. Your lender can help you determine which one is right for you.
These documents include the SBA Form 3508, SBA Form 3508EZ, SBA Form 3508S, or a lender equivalent. The 3508EZ and the 3508S are shortened versions of the application for borrowers who meet specific requirements.
The next step is to compile the right documents to submit. This includes:
- Payroll information and bank account statements for third-party payroll providers to show the amount paid to employees
- Tax forms
- Payroll tax filings reported or that will be reported to the IRS
- State quarterly business and individual employee wage reporting and unemployment insurance tax filings
- Payment receipts and information regarding contributions to employee health insurance and retirement plans that were included in the forgiveness amount
- Business mortgage interest payments
- Copy of lender amortization schedule and receipts verifying payments, or lender account statements.
- Business rent or lease payments
- Business utility payments
Once you have completed the correct form and have gathered all of the documents, you can submit them to your lender. Your lender should inform you if additional documents are needed. Also, if the Small Business Administration decides to review your loan, you will be notified.
When should I apply for PPP loan forgiveness?
Some businesses may already be eligible to apply for loan forgiveness, but it’s been recommended to wait a bit. A small business that applies for PPP loan forgiveness too early may not get the entire amount forgiven. It depends on whether you chose the 8-week or 24-week covered period. Your lender may be able to advise you about the best time to apply for forgiveness based on your specific situation.
The Bottom Line on PPP Loan Forgiveness
When it comes to PPP loan forgiveness, it’s important to make sure you apply within the time period and meet the criteria. You also want to have the right application so you don’t waste time and have all the right documents ready to go. Following these steps and keeping in contact with your lender through the process should increase your chances of having a good portion of your PPP loan forgiven.