05 Jun PPP Loan Forgiveness: 5 Things You Should Do
If you’ve received a PPP Loan, you probably have questions about how it should be used. There are certain things you need to know to get PPP Loan forgiveness, and we’re here to help. Here are 5 things you should do to make the forgiveness process as painless as possible.
1. Keep the PPP Loan Separate
We’ve advised our clients to keep personal and business income in separate accounts. That way, expenses, deductions, and more are all easy to track when it comes time to filing taxes. We’d recommend doing the same with the PPP Loan. Keep that amount in a separate account, that way it leaves a clear trail of how much was used and what it was used for.
2. Pay Your Utilities
While the PPP Loan is largely for paying your employees, it can also be used for business utilities. The catch is that those payments must’ve been established before February 15, 2020. The loan can be used to cover electric, gas, water, Internet, and phone bills.
3. Pay Yourself Your Wages
Many of our clients are business owners, and through our advisement, have payroll for themselves. With the PPP loan, those business owners can continue to pay themselves as they would any other employee. Divide your total payroll (for the 8 weeks as is the guideline for the loan) by 0.75 and that gives you your maximum PPP Loan forgiveness amount.
Example: You would normally make $10,000 in eight weeks. Divide that by 0.75. $10,000/0.75= $13,333.33. You can have $13,333 forgiven. Keep in mind there is a cap of $15,385 that can be paid to each employee over that eight weeks.
4. Use the Money
While the SBA hasn’t explicitly stated that you must use the money if approved, all signs seem to point to it. Line 9 on a Schedule-A Form uses the phrase “Enter any amounts paid.” Nowhere does the form suggest that the money could be unused. To be on the safe side, use the money.
5. Apply Now if You Haven’t
On May 28, 2020, a new Bill was passed that would make the PPP Loan easier to qualify for by extending the eight weeks to use the funds to 24 weeks. The 0.75 division was changed to 0.60. And the June 30 deadline was pushed back to December 31. Furthermore, the SBA reported that funds were still available. Contact your bank immediately to get approved.