Aaron Bloom, a Director in Gorfine, Schiller &Gardyn’s Tax Services, explains the current status of the PPP loan forgiveness application process and what companies should know as deadlines approach.
Q: Is it too late to complete and submit a PPP loan forgiveness application at this point in time?
A: Technically, applications for the PPP program must have been submitted through May 31, 2021, and companies had 30 days to cure any problems with those applications, meaning the Small Business Administration’s(SBA) PPP program sunsets June 30, 2021. At this time, the SBA is only assessing forgiveness, so it’s not too late. In fact, for most companies, this is really the hotspot to start doing the PPP forgiveness process.
Q: How do companies know which loan forgiveness form is correct for them?
A: The correct loan forgiveness form is contingent upon a number of circumstances.
Form 3508S is the easiest form for companies to complete (the “S” stands for simple). If you received a PPP loan of under $150,000, regardless of the number of employees, this is the form to use. You fill out basic information such as name, number that you received for the SBA loan, and the loan amount. Most banks where you received the loan are completing these by portal, so most information is prompted. Once the general information is complete, you certify that you spent the money correctly, and the form is complete.
If a company is over $150,000 in PPP funds, there are two form options. The first, and most common, is the 3508. Companies over $150,000that meet the general requirements of not having basic work reductions of more than 25% or reduced salaries by more than 25% can use Form 3508EZ. It’s not as easy as the simple form, but it’s much easier than the 3508.
Q: What is the overall covered period for this right now?
A: The covered period depends on determining the amount, timing and overall strategy of your PPP forgiveness. Last year, when conversations first started and companies began receiving funds, most people focused on the short defined eight-week cover period because that was the guidance from the SBA. Towards the end of the summer and into the fall of 2020, the SBA extended the covered period to 24-weeks, leaving companies with a choice of 8 to 24 weeks depending on whether it’s necessary to lengthen that set time period to take advantage of as much PPP forgiveness as possible.
The SBA’s goal was to try to make it possible for struggling companies to receive PPP forgiveness. For companies that weren’t operating and only had an 8-week cover period, it was challenging to receive PPP forgiveness. When the SBA extended its availability up to almost six months, it made it much easier for companies to get PPP forgiveness. It’s important to work with an advisor to make sure they’re choosing the right period that fits your PPP forgiveness needs.
Q: What other documents should be compiled and prepared for this process?
A: Previously in the origination of the PPP program, the government also began the Employee Retention Credit (ERC). At the start of the PPP process, if companies received PPP funds, they couldn’t qualify for the ERC. Companies in the early forgiveness process took all of their wages, focusing only on the PPP program. After PPP round two started in 2021, companies could qualify for the ERC, even if they received PPP funds.
Therefor, companies who originally used their wages and benefits to offset their PPP may potentially be taking funds away from receiving the ERC.
Now, companies can use up to 60% of PPP forgiveness for payroll, and the rest of the 40% can be used for operational expenses, utilities, rent, and other certain expenses.
It takes some strategizing and planning in order to qualify for both. Companies need to measure what they need for PPP forgiveness. If they receive the PPP forgiveness, they should also consider other relief options available, such as the ERC, Restaurant Revitalization Fund, Shuttered Venue Operators Grant, all of which relate to what was received for PPP funding. Once there’s a strategy in place, and the S form is complete, companies need to work with their payroll provider for certain reports proving payroll was paid along with invoices, canceled checks for benefits, rent, etc.
Q: What’s the overall timeline typically of gaining loan forgiveness?
A: The process generally begins with accessing an automated portal where you received your PPP loan then submitting the information to the bank from which you received the loan, not to the SBA. The bank then gives their approval or denial. Denial typically means more information is needed.
Once the bank receives approval, usually taking one to two weeks to occur, the SBA will need to approve, which takes up to two weeks. Now that the SBA is no longer accepting new loans, they’ve put all of their resources into the forgiveness avenue, resulting in a much quicker turnaround time from the SBA and banks.
Q: How does Gorfine, Schiller & Gardyn assist in the overall loan forgiveness application process for your clients and prospects?
A: This has been an ongoing process for our clients. Whether it’s helping clients apply for the PPP loan or other relief options. Most importantly, it’s a strategy session, and we want to avail our clients as much of the benefit programs that the government has offered, whether it is just PPP or whether it’s PPP and the ERC or the Restaurant Revitalization Fund, etc. All of those relief options interact. Our firm knows the ins and outs of these programs and the best way to find relief for small business owners.
Q: Is there anything else to add or anything we may have missed?
A: Now’s the time. Ensure your loan is forgiven, and move on from PPP one so there’s time to determine whether you qualify for other relief options such as the ERC. If you received funds in PPP round two, consider forgiveness at the same time.
Aaron Bloom is a Director of Tax Services at Gorfine, Schiller & Gardyn. For over 30 years, he has been specializing in tax services including, but not limited to, the areas of real estate, law, healthcare, and technology. Aaron has been actively involved in the MACPA, having served and chaired its Ethics and Federal Tax Committees. He is currently an appointed member of the AICPA Joint Trial Board, which reviews ethics cases against CPAs across the country.
