Paycheck Protection Program

Current PPP Information

PPP information updated October 5, 2021

The Paycheck Protection Program (PPP) was established in 2020 under the CARES Act as an effort to aid small business owners affected by COVID-19 and keep workers employed. The late 2020 COVID-19 Relief Bill (under the Consolidated Appropriations Act of 2021) established a second round of PPP loans for affected businesses and modified many of the rules about using funds.

Over 5.2 million loans have been taken out since the beginning of April 2020, and a lot has changed since the program launched. If you are one of the 5.2 million businesses that has received a PPP loan or are considering applying for PPP round 2, it’s important to understand the requirements and get the latest PPP information. Check back here when you hear PPP in the news—we’ll keep this page up to date with verified PPP information. 

The PPP program is no longer accepting new applications. If you need assistance accounting for funds received or applying for forgiveness, please contact us to work with one of our PPP specialists.

My PPP loan was forgiven. Do I need to do anything else?

If your PPP loan was forgiven, congratulations! You do still need to maintain records of how you spent the PPP funds as the SBA has up to six years to audit your forgiveness application.

What does it mean if my PPP loan status shows a HOLD code?

Wondering where your PPP funds are? The SBA placed hold codes on 190,000 Paycheck Protection Program loans. They have been working to clear the codes (down from 2 million), developing new certification language and a machine learning tool that would assist in the process. These codes don’t necessarily indicate fraud, waste, abuse, or ineligibility; a hold code could be the result of a minor error, such as a Social Security or TIN typo. Unfortunately, they’re holding up both loans that have yet to be disbursed and those that are in the forgiveness process. Although there is no longer immediate loan approval, 96% of applications are approved within 48 hours if accurate information is provided.

Do small employers receive PPP priority?

On February 22, the Biden administration announced that businesses with more than 20 employees will be unable to apply for PPP loans for a two-week period, beginning on February 24th. Other changes announced on that date include revisions to rules that will help sole proprietors and other businesses with very few employees receive access to relief funds. Read more.

How can I spend my PPP funds?

PPP funds are meant to be used to retain employees by providing funding for payroll. This includes salary, wages, vacation, leave (parental, family, medical, or sick), as well as health benefits. Funds can also be used for other expenses such as: 

  • Personal protective equipment (PPE) and adaptive investments that help a business comply with safety guidelines (such as sneeze guards and plexiglass)
  • Cloud computing, human resources, and accounting needs
  • Damage not covered by insurance that is related to public disturbances that occurred during 2020
  • Essential business costs, such as perishable goods for a restaurant
  • Utilities, mortgage interest, and rent, as long as the agreement or mortgage was signed before February 15, 2020

Businesses are now permitted to deduct business expenses covered by forgiven PPP loans on their tax returns, regardless of whether the loan was taken out under the first or second round. Based on our recent experiences with year-end tax planning, we expect many businesses that received PPP loans to see a positive impact on their 2020 tax bills.

One note here is the 60/40 rule. In order to qualify for forgiveness, 60% of the loan amount must be used for payroll costs, which does not include payment to independent contractors. The remaining 40% can be used for other eligible expenses mentioned above. 

If you are self-employed, note that your PPP funds are not considered eligible for contribution to your Solo 401(k). According to the SBA, payroll costs for an independent contractor or sole proprietor only include wages, commissions, income, and/or net earnings.

Can I apply for a second PPP loan?

Yes, you can apply for the second round of PPP loans if you have spent your round 1 funds and meet certain criteria. The bill specifically targets businesses that have experienced an outsized impact, including restaurants, live venues, and nonprofits. Sole proprietors, independent contractors, and eligible self-employed individuals, along with churches and faith-based organizations, are included under the second round. Loans are capped at $2 million per business.

Second-time loans are limited to businesses with fewer than 300 employees and at least a 25% drop in gross receipts in one 2020 quarter compared to that same quarter in 2019. If you weren’t in business in 2019, you need to have been operating as of February 15, 2020. In that case, you can compare the second, third, or fourth quarters of 2020 to Q1.

At this time, it does not appear as though businesses can participate in round 2 if they did not participate in round 1.

Can I claim the Employee Retention Tax Credit (ERTC) as well?

Under the CARES Act, which was the first major stimulus package that passed in 2020, businesses that received PPP loans weren’t eligible for other tax credits. The second bill changes the rules for the Employee Retention Tax Credit, allowing PPP borrowers to take advantage of this valuable credit against quarterly payroll taxes.

One caveat: you cannot use the ERTC against the same wages covered by PPP. We strongly recommend that PPP recipients meet with their strategic advisors prior to applying for PPP forgiveness, in order to maximize the benefits of both programs. PPP holders can claim the ERTC retroactively, provided they do so with their 2020 payroll tax filings. 

Due to pending legislative changes, we recommend taking advantage of the ERTC as soon as possible if you plan to do so. Either way, the program is currently scheduled to expire at the end of 2021.

How do I apply for PPP loan forgiveness?

You may apply for PPP loan forgiveness up to 10 months after the last day of the covered period; at the end of the 10 months, you will begin making principal and interest payments on any portion of the loan that has not been forgiven. 

The EZ Application is for PPP borrowers who borrowed $150,000 or less, meet a set of criteria, and are not required to submit a Schedule A worksheet. These borrowers will self-certify that they meet the criteria. The SBA has not, as of this time, released the EZ Application. The second application requires submitting a Schedule A worksheet, with which your CPA can assist. You can find the applications, and requirements to determine which loan forgiveness application applies to you here.

We recommend submitting your application as soon as your financial institution allows you to do so.

As of May 27, 2021, the SBA has forgiven two-thirds of 2020 PPP loans, meaning roughly 69.5% of the 2020 loans have been forgiven in whole or in part. 81% of forgiven loans were for less than $100,000. The current system is expediting loans under $150,000, showcasing the difficulty some larger borrowers are facing in the forgiveness process. The SBA is working with lenders to figure out a simplified process to help all loans, regardless of size.

3508S Loan Forgiveness Application (Revised January 19, 2021) for loans under $150,000

As of August 4, 2021 the SBA introduced a streamlined application portal to allow borrowers with PPP loans of $150,000 or less through participating lenders to apply for forgiveness directly through the SBA. Lenders are required to opt-in with over 600 banks currently enrolled. To see if you are able to apply for PPP loan forgiveness visit the SBA PPP Direct Forgiveness Portal.

What documents/records do I need to keep in order to apply for forgiveness?

Once you receive your loan, it’s your responsibility to keep track of how you spend every dollar. We’ve created a comprehensive list of planning and bookkeeping tips to help you prepare to apply for loan forgiveness and create the documentation you would need in the event of an audit. 

Borrowers with loans over $150,000 will be required to submit documentation showing how they used their PPP funds. While borrowers with loans under $150,000 will self-certify in lieu of submitting documentation, they’re still required to maintain records for up to 4 years. The SBA reserves the right to audit forgiven loans. Documentation includes:

  • Tax forms
  • Payment receipts, canceled checks, or account statements that document employer contributions to employee benefit plans
  • Copies of lender amortization schedules
  • Receipts verifying eligible payments from the covered period
  • Proof of rent or lease payments
  • Proof of business utility payments
  • Written records to prove that you tried to rehire furloughed employees after receiving your PPP funds

What if my PPP loan is not forgiven?

If your loan is not eligible to be forgiven, you have 10 months after the last day of the covered period before payments would begin (note that interest will accrue over the 10 months). All loans will be due in two years and are eligible to be repaid prior to the two years with no penalties or fees.

If you have any questions about the PPP forgiveness application process, the documentation you need to provide, or how your PPP loan may affect your taxes, please contact us to schedule a consultation. We stay up to date on all PPP information and can help you make proactive decisions for your business.