More than 423,000 businesses in Florida received federal loans meant to help pay employees.
The Paycheck Protection Program loans are generally forgivable if at least 60% of the money is used to pay for payroll.
The remaining amount could be used on other eligible expenses like utilities and rent.
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Business owners can apply for loan forgiveness at any time up until the final payment is due.
Victoria Guerrero, the Small Business Administration’s South Florida district director, says the businesses should gather the needed paperwork and apply as soon as possible.
“If you wait until the last minute, those months that went by, you are accruing interest and if the loan is not completely forgiven you would have accrued some interest on that,” Guerrero said.
South Florida staffing and recruiting agency ‘Alpha 1 Staffing’ received PPP funds when they needed it most.
“We were very close to closing, it was absolutely devastating,” said Alpha 1 Staffing President Garrie Harris.
Harris says their application for PPP loan forgiveness was approved.
“Because that is another burden that is taken off the small business because now you need to think about how am I going to pay this money back if the economy does not improve,” Harris said.
It’s one hurdle jumped, but preparing for tax season is another.
The U.S. Treasury and Internal Revenue Service released guidance in November stating “Since businesses are not taxed on the proceeds of a forgiven PPP loan, the expenses are not deductible. This results in neither a tax benefit nor tax harm since the taxpayer has not paid anything out of pocket. If a business reasonably believes that a PPP loan will be forgiven in the future, expenses related to the loan are not deductible, whether the business has filed for forgiveness or not.”
This could make taxable income appear higher on paper without those write-offs.
It’s just one more reason why businesses should get their books and records in order and contact a tax professional early to evaluate the potential impact on their taxes.
The SBA did release a simpler forgiveness application for businesses that received less than $50,000 in PPP loans.
Businesses that received more may need to provide additional back-up documentation like payroll reports and additional business information.
Guerrero suggests calling the same bank or financial institution you used to apply and confirm what documentation you will need to submit with the forgiveness application.