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August 27, 2020

PPP Loan FAQ: What Not-for-Profits Need to Know About Forgiveness Timing and Tax Planning

With the end of the year looming closer, many organizations are focused on ensuring they receive forgiveness for their Paycheck Protection Program (PPP) loan. Businesses and not-for-profits are wondering if and when they should apply for loan forgiveness, and what changes are coming from Congress, the SBA and banks. Below we answer common questions around PPP loan forgiveness timing, year-end tax planning and talks of another stimulus package.

PPP Loan Forgiveness Timing

Q: Should I submit my application now? Why or why not?

A: Anders is advising clients to wait until further guidance is released by the SBA and IRS. We do not see any benefits to applying early, and we see more changes as Congress gets closer to passing another stimulus package.

Q: Can I submit my application now?

A: The short answer is yes you can submit. But not all banks are accepting applications.

Q: Can I get PPP loan forgiveness in 2020?

A: Forgiveness timing is still up in the air, but it will most likely be in 2021 based on the bank’s and SBA’s timelines. Certain banks are taking forgiveness applications now, but unless your company has already applied it’s unlikely that forgiveness will happen in 2020. When we have more information Anders will advise clients on best timing to apply, but for now, patience is key as businesses have 10 months to apply after their covered period.

Q: Is there automatic forgiveness for PPP loans under $150,000?

A: No, but there has been language in each bill surrounding automatic forgiveness for smaller loans. Unfortunately, nothing has been passed at this time.

Year-end Planning Related to PPP Funds

Q: Are expenses paid with PPP funds deductible?

A: The IRS’s current position is that expenses paid with PPP funds are not deductible if your loan is forgiven. What is unclear is if the expenses paid with PPP funds are nondeductible for 2020 tax returns or not until 2021 when the loan is forgiven.

Q: Is there anything I should be doing for year-end tax planning regarding my PPP loan?

A: At this time, with so much uncertainty, year-end tax planning related to PPP funds will remain fluid.

Rumors of Another Stimulus Package

Q: Will there be a CARES Act 2.0?

A: It appears likely. The timing and dollar amount are the two largest unknowns. What seems to be important aspects of any bill could include:

  • Second round of stimulus checks for individuals
  • Reallocation of funds between different CARES Act 1.0 programs
  • Adjustments to the Paycheck Protection Program, including a potential second round of funding and clarification of ambiguous guidance
  • IRS corrections and guidance regarding deductibility of expenses paid for with forgiven PPP funds
  • State and local government funding
  • Liability protections
  • Unemployment assistance

Q: When could the next stimulus package be coming?

A: Timing is unclear and ever-changing. Stay tuned for more updates.

Legislation is continuing to evolve and it’s important to keep up with the latest rules and regulations to make sure you’re making decisions based on accurate data. Our advisors are closely following COVID-19 relief efforts and will continue to publish insights to keep you informed about potential impacts and benefits. Visit our COVID-19 Resource Center for more resources. To discuss your situation and recovery options, contact an Anders advisor below.

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