By Martin E. Prendergast, MBA
Gray, Gray & Gray, LLP
Have you applied for PPP loan forgiveness yet? If not, you’d better hurry.
Architectural, engineering and design firms that received a Paycheck Protection Program (PPP) loan during the “first draw” period in 2020, and who followed the SBA guidelines for using loan proceeds, can apply for loan forgiveness up to 10 months after the end of the 8-week or 24-week coverage period. Unless you apply for forgiveness within 10 months of the last day of your coverage period, you will begin making loan payments to your PPP lender.
That means if you received disbursement of your PPP loan on May 1, 2020 and chose the full 24-week coverage period, you have until August 11, 2021 (10 months after the end of the coverage period) to submit your application for loan forgiveness.
If you received your PPP loan earlier, your deadline is even sooner. If you chose the 8-week coverage period option, your deadline to apply for loan forgiveness has passed.
As a reminder, to qualify for loan forgiveness, your business must have maintained staffing and compensation levels, spent the PPP loan proceeds on payroll costs and other eligible expenses, and used at least 60% of the loan to cover payroll costs. Documentation of how you used the PPP funds must be provided, and depending on your situation may include:
- Payroll tax filings reported, or that will be reported, to the IRS (typically, Form 941);
- Tax forms (or equivalent third-party payroll service provider reports) for the periods that overlap with the covered period;
- State quarterly business and individual employee wage reporting and unemployment insurance tax filings reported, or that will be reported, to the relevant state;
- Bank account statements or third-party payroll service provider reports documenting the amount of cash compensation paid to employees;
- Payment receipts, cancelled checks, or account statements documenting the amount of any employer contributions to employee health insurance and retirement plans that the borrower included in the forgiveness amount;
- Business mortgage interest payments (copy of lender amortization schedule and receipts verifying payments, or lender account statements);
- Business rent or lease payments (copy of current lease agreement and receipts or cancelled checks verifying eligible payments);
- Utility payments (copies of invoices and receipts, cancelled checks or account statements).
For loans under $150,000 there is a simplified loan forgiveness application available that requires only a shortened form and authorized signature and certifications. It is recommended that forgiveness support still be retained on file.
Second draft PPP loans follow a similar schedule to apply for forgiveness, although the list of items allowed to be paid with loan proceeds has expanded to include personal protective equipment (PPE), software and supplier costs.
If you have questions about how to apply for PPP loan forgiveness, or need assistance with the required documentation, please contact us at (781) 407-0300.
Martin Prendergast is a Manager in the Architecture, Engineering & Design Practice Group at Gray, Gray & Gray Certified Public Accountants and Advisors in Canton, Mass. He can be contacted at (781) 407-0300 or at firstname.lastname@example.org