If you received an initial Paycheck Protection Program loan, you can qualify for a second round (called a “second draw”) of tax-free PPP cash.
To qualify for the second-draw Paycheck Protection Program loan, you must:
- have 300 or fewer employees;
- have suffered a 25 percent or greater loss in revenue during at least one quarter of 2020 when compared to 2019; and
- have already used your original PPP money (or be planning to use it soon).
The mechanics of the second-draw PPP loan amount follow the rules that apply to the original (first-draw) PPP loan, with some modifications.
The overall Paycheck Protection Program loan limits work as follows:
- The loans are capped at $2 million or less.
- If you are not a hotel or restaurant (NAICS code 72), you identify your average monthly payroll for either 2019 or the trailing 12 months and then multiply it by 2.5 to find your loan amount.
- If you are a hotel or restaurant, you multiply by 3.5.
During a period of your choice, beginning eight weeks from the origination date of the loan and ending 24 weeks after the origination date, you must use 60 percent or more of the monies for defined payroll in order to achieve 100 percent forgiveness.
Expenses that can qualify for loan forgiveness include the following:
- Interest on mortgage obligations
- Operations expenditures
- Property damage
- Supplier costs
- Worker protection
More Free Resources
For a brief background on the PPP’s tax history, please visit Paycheck Protection Program Tax Deductions Denied by IRS and New Paycheck Protection Program Forgiveness Tax Laws.
Did you know you can qualify for both the PPP Loan and the Employee Retention Tax Credit? Please visit New COVID-19 Self-Employment & Payroll Tax Credits.
For a brief background on the original Paycheck Protection Program loan, please visit COVID-19 SBA Loans: EIDL & The Paycheck Protection Program.
And finally, keep these three thoughts in mind:
- Act fast, because this money goes in a hurry.
- The incoming PPP loan monies are tax-free.
- Expenses paid with PPP loan monies that are forgiven are tax-deductible.
If you want help maximizing your forgiveness and tax credit amounts with tax planning strategies, and if you’re wondering about how this will affect your financial reports, please visit My Contact Page for assistance.
New Chance for Paycheck Protection Program Cash
Did you miss out on your prior opportunities to receive tax-free PPP cash?
Many did miss out. Why? One reason: the word “loan.” Who wants a loan? No one. Well, almost no one.
But who wants a tax-free cash gift? If you do, read on for the details.
But first, you should know that the big picture works like this:
- You obtain your tax-free PPP monies from a lender (it’s called a “loan,” but watch that word disappear as you read on).
- You spend all the PPP money on yourself if you are self-employed or operate as a partnership; on payroll (including pay to you, if that applies); and on other covered expenses such as rent, interest, utilities, operations, property damage, suppliers, and worker protection.
- You apply for loan forgiveness and achieve 100 percent loan forgiveness, which is easy when you spend 60 percent or more of the money on payroll (and yourself if you are self-employed or a partner in a partnership).
- You deduct the expenses that you paid with the PPP loan monies that were forgiven.
New Cash on the Table
The new COVID-19 stimulus act sets aside $35 billion for first-time PPP applicants, with $15 billion of that made in loans for first-time applicants with 10 or fewer employees or made in amounts less than $250,000 to businesses in low-income areas.
The new deadline of March 31, 2021, replaces the expired deadline of August 8, 2020.
The monies available in this new round of PPP funding are on a first-come, first-served basis. Don’t procrastinate. Get your application for your first-time PPP monies in now.
Page Last Updated: 02/17/2021