Institutions are waiting for more guidance from the federal government as well as potential legislative action on the Paycheck Protection Program.
Although the Small Business Administration opened its Paycheck Protection Program forgiveness portal on Aug. 10, many contractors have found their banks are not ready to accept applications. The portal allows lenders to submit completed PPP loan forgiveness applications to the SBA for its review.
This means that small businesses across the country — including hundreds of thousands of contractors — that took money from the government assistance program designed to keep workers on the job during the COVID-19 pandemic, have to wait to submit their applications and find out if their loans will be forgiven.
Many banks have indicated that they are waiting to see if new guidance or legislation will streamline the forgiveness process. They are also want to see if Congress will pass legislation providing automatic forgiveness for loans of $150,000 or less.
Major lending institutions such as Chase and PNC Bank have not begun accepting forgiveness applications, according to their websites. Some banks, however, are accepting applications, according to Mike McVay, Tax Accountant, industry leader of McVay Business Services Accounting practice. These applications are awaiting approval by the SBA, he said, adding that he has not seen any SBA approvals yet.
Meanwhile, questions abound about several aspects of the forgiveness program. Most notably, some contractors are wondering whether to apply for forgiveness because of an IRS ruling might mean they pay more in taxes than to pay back the original loan. In a notice this spring, the IRS said it had ruled out tax deductions for wages and rent paid with forgivable PPP loans in order to prevent a “double tax benefit.”
The sooner contractors are able to submit for forgiveness, the sooner they will be able to contemplate the ramifications on their financial statements and tax returns, Callahan said.
It’s also important to note that some banks will not accept the forgiveness application until either the eight-week period is completed or the 24-week period is completed since those are the options that are listed on the forgiveness application, he said.
“It is in the best interests of the small business to achieve maximum forgiveness and submit a true and accurate certification based on the guidance available at the time of their submission for forgiveness. Each small business should consult with their respective qualified trusted business advisor to make sure they meet all of these requirements to achieve maximum forgiveness," he said.
Mike McVay, Tax Accountant and Certified QuickBooks ProAdvidor * 850-725-5696
Mike McVay, Tax Accountant Blog
Certified QuickBooks ProAdvisor & Licensed Tax Accountant Pensacola, FL
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