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Congress recently passed legislation to ease the requirements of the forgiveness aspect of the program, extending the usage term from 8 to 24 weeks, and the percentage that must be used for “payroll” purposes from 75% down to 60% of the total loan proceeds received.

Therefore, if at least 60% of the loan proceeds are used to pay for “payroll” type expenses, which are essentially salary and wage compensation for the employees of the company, including owner/officers, as well as payroll benefits, including health insurance and retirement plan contributions, as well as state and local payroll taxes then the borrower will have the opportunity to request forgiveness. The other eligible expenses, in the 40% category, must be used to pay for occupancy costs, including rent, utilities and interest on mortgage payments paid for the acquisition of real property.  Additionally, expenses incurred for fuel used for transportation are considered allowable deductions.

So, while this program has benefited many businesses, it’s important to remember that it was set up to offer emergency loans, with the opportunity to obtain partial or full forgiveness, if used for the intended purpose, which is primarily to maintain your company’s employment.  Another significant consideration is that if forgiveness of some or all of the loan is achieved, then the underlying expenses that were paid from the loan proceeds are not income tax deductible. 

Please contact us if you have any questions, Mike and Staff

Wittenberg CPA, PS

329 W. Railroad Avenue, Suite 200

P.O. Box 1783

Shelton, WA  98584

Ph (360) 426-0230 Fx (360) 426-1464

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1401 4th Avenue E., Suite 201

Olympia, WA  98506

Ph (360-350-4460 Fx (360) 338-0269

Website: www.wittenbergcpa.com

www.facebook.com/wittenbergcpa

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