PPP Loan Forgiveness
April 27, 2020
Dear Clients & Friends,
We hope that you are doing well during this time. As most of you are aware, our office is remaining open during this time and we are here to answer any questions you may have. We are working diligently preparing tax returns and assisting our clients throughout the COVID-19 pandemic.
You are receiving this letter because our records indicate that you have applied and/or have been approved for the Paycheck Protection Program loan. The Paycheck Protection Program loan is designed to provide direct incentive for small businesses to keep their workers on payroll. The most appealing aspect of this loan is the forgiveness.
The loan will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent and utilities (at least 75% of the forgiven amount must be used on payroll). Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.
You will owe money when your loan is due if you use the loan amount for anything other than payroll costs, mortgage interest, rent, and utility payments over the 8 weeks after getting the loan. You will also owe money if you do not maintain your staff and payroll.
We are sure many of you are wondering how you can request loan forgiveness. You will need to submit an application to the lender that is servicing your loan. You will be required to include documents that verify the number of full-time equivalent employees and pay rates, as well as the payments on eligible mortgage, lease, and utility obligations. You must certify that the documents are true and that you used the forgiveness amount to keep employees and make eligible mortgage interest, rent, and utility payments. The lender must make a decision on the forgiveness within 60 days of receipt of the application and supporting documents. All payments are deferred for 6 months; however, interest will continue to accrue over this period.
It is important to start preparing now for your forgiveness application. Keeping good payroll records, compiling receipts and statements for utility payments, rent, and mortgage interest, keeping employee and/or shareholder insurance statements, and recording pension contributions on behalf of employees and/or shareholders.
We are here to assist you during this time. Please call the office if you have any questions regarding the information contained in this letter.
Robert G. Starkey, CPA