What businesses need to know about PPP Loans

April 30, 2020

Do I Have to Pay Back My PPP Loan?

Many of you and your clients have applied for the Payroll Protection Program loan. If you receive the loan, do you have to pay it back? No, but only if you qualify for loan forgiveness and properly document necessary items. Let’s take a look at those two important concepts.

How do I qualify for loan forgiveness? There are several things to know about loan forgiveness. Here are the main requirements.
What documentation will be required for loan forgiveness? Note that the CARES Act specifically prohibits forgiveness of loan amounts without submission of required documentation to the lender that is servicing the covered loan. The required documentation for loan forgiveness treatment is as follows:
What other tax benefits are available to businesses under the CARES Act?
The credit only applies to “qualified wages” paid from March 13 through December 31, 2020. Qualified wages depend on the number of employees the business had in 2019. If the business averaged more than 100 full-time employees, qualifying wages are wages paid when employee services are not provided. For smaller firms, all wages are eligible for the credit.
Employers may be able to get this credit quickly by reducing employment tax deposits otherwise owed to the IRS by the amount of the credit. Employers can also file new IRS Form 7200 for advance payment of credits in excess of payroll tax deposits.

There are many rules and complexities involved with this payroll tax credit. One rule is that if an employer gets a PPP loan, it is not eligible for this credit. If you plan to take this credit, please be sure you understand the rules or are appropriately advised.

If you have any questions about these provisions or have any other tax questions, please feel free to contact Post Polak.