Small businesses that took a forgivable loan this year — as well as their banks — can’t wait to have the balance wiped out, but tax professionals are telling them to slow down, CNBC.com reported. The CARES Act, which went into effect this spring, established the Paycheck Protection Program, an emergency line of funding for small businesses suffering during the coronavirus pandemic. Between April 3 and Aug. 8 — the last day a firm could have applied for a loan — more than 5 million PPP loans were approved, accounting for $525 billion, according to data from the Small Business Administration. Applicants are eligible for forgiveness if they devote at least 60 percent of the proceeds to payroll expenses. Firms that fall short of the amount may be eligible for partial forgiveness. This fall, the SBA and Treasury Department have signaled that they’re ready to start processing loan forgiveness. In October, the SBA rolled out a simplified application (known as Form 3508S) for businesses that received a loan of $50,000 or less. Even the banks that made the loans in the first place are getting antsy, sending borrowers letters encouraging them to apply to have the balance wiped out or make plans to begin payment as early as next month. “Thank you for trusting Florida Credit Union with your Small Business Administration (SBA) Paycheck Protection Program (PPP) loan,” read one email to a borrower, obtained by CNBC. “Your loan obligation is coming due with your first payment due date on 11/15/2020,” the missive went on. “Please note, this loan is not a grant. As a reminder, you need to apply for loan forgiveness using the link below.” Tax professionals have shied away from marching clients toward forgiveness because so much remains uncertain around the PPP loan program. Lawmakers have spent the last few months fighting over the next round of COVID-19 relief, including the next steps for cash-strapped PPP borrowers. Tax deductibility is at the heart of the conflict for small businesses and the tax professionals aiding them. Forgiveness of the PPP loan is tax-free, but borrowers won’t be able to claim tax deductions for the business expenses covered by forgiven loan proceeds, according to the IRS.
