With PPP Loan Changes on Horizon, Small Businesses Told to Wait

Glenn Sandler is betting most of his clients who received pandemic relief loans ultimately won’t have to fill out any federal government forgiveness forms.

Sandler, a CPA in Melbourne, Fla., is telling clients to focus on running their business, pay their staff, and to hold off on applying for forgiveness even if their bankers say they’re ready to accept those applications. That’s because more changes to the Paycheck Protection Program are expected in the coming months that may make it unnecessary for millions of borrowers.

“There’s people that have bigger things to worry about right now than filling out a PPP application that might not have to be filled out,” said Sandler, the owner of G.I. Tax.

Once the covered period ends, borrowers will have 10 months to seek forgiveness for Paycheck Protection Program loans, a pillar of the government’s pandemic response (Public Law 116-136). But frontline accountants, small business advocates, and accounting’s largest professional organization, all advise PPP borrowers to give Congress, the Small Business Administration, and lenders time to answer key questions about taxes and documentation.

Forgiveness in Flux

The SBA said that it began accepting and reviewing forgiveness applications Aug.10. Banks in recent weeks have started telling borrowers that they’re preparing to accept applications.

Albert Campo, a CPA in Manalapan, N.J., tells his clients to delete the emails and ignore the phone calls from local branches.Too many things could change, he tells his clients.

“It’s been a moving target nonstop,” said Campo, who is managing partner at AJC Accounting Services. “I explain what’s going on and what Congress is doing currently and why we’re not rushing to apply right now.”

The American Institute of CPAs, which has worked with the banking industry on the PPP roll out, said many lenders are still testing their forgiveness application systems, and they haven’t decided which loan documents will be required.

“Do you want your client to be the beta tester for the forgiveness application process or do you want to sit back and wait a little bit longer, let the rest of the guidance come out, let the SBA and your lender get their processes flowing,” said Lisa Simpson, director of firm services for the AICPA, during an Aug. 20 webinar.

Industry group Independent Community Bankers of America is also telling its members that there is no rush.

Rules Being Written

Designed to keep businesses afloat during the unprecedented economic turmoil, the loans can be forgiven if they meet certain conditions.

The rules around the loans are still in flux. Treasury and the SBA have issued more than 20 interim final rules plus guidance on how to interpret parts of the program. The most recent was released Monday, detailing whether certain costs would count as expenses for forgiveness.

Important tax questions remain unanswered. Many businesses are waiting to see if the IRS changes its stance that certain expenses paid for with PPP funding can’t be deducted for federal tax purposes. When businesses can’t deduct these expenses, they can’t lower their taxable income at a time when many businesses are strapped for cash.

“For some businesses that could be life or death for them on whether they have to pay taxes on them,” said Adam Markowitz, an enrolled agent at Howard L Markowitz PA in Leesburg, Fla.

Waiting on Congress

There is also widespread pressure for Congress to simplify the forgiveness process after businesses struggled to gather the documents and make the calculations required to receive the funding this spring.

Under bipartisan bills (H.R. 7777, S. 4117) borrowers would only have to assert that they had complied with the program and were eligible for the loans, less than $150,000, to be forgiven.

Bill sponsors Rep. Chrissy Houlahan (D-Pa.) and Sen. Kevin Cramer (R-N.D.) are hopeful the measure could be included in another stimulus package this fall, their offices said.

The American Bankers Association supports efforts to make forgiveness easier for borrowers, but said in a statement that lenders are prepared to comply with the existing rules.

Smaller lenders are hoping that Congress goes a step further and reduces the paperwork required for loans between $150,000 and $2 million, said Paul Merski, executive vice president for congressional relations at the Independent Community Bankers of America.

Under the current rules, borrowers have to turn over utility bills and other records to document how they used the funds. But the banks don’t want to have to store all those files let alone process all that paperwork, Merski said.

“It’s become a very costly program to administer for the lenders. And the more it can be simplified, the easier it will be for both the borrower and lender,” he said.