Farm Credit Webinar Discusses Complexity of P3 Forgiveness | The latest in agribusiness
The US Small Business Administration’s Paycheck Protection Program has provided loans to help businesses keep their workforce employed during the COVID-19 crisis.
The aim was to prevent the already rapidly rising unemployment rates from falling off the charts.
Employers are now eligible for loan cancellation, which is especially important for farms and other types of farming businesses struggling to make ends meet during the pandemic.
The SBA program provided loans instead of outright grants to ensure that the money was used for its intended purpose – to pay workers – that employers should document.
Consultants Keith Dickinson and Erin Pirro provided a recap and update on the loan cancellation process and answered specific questions to help people make sure they’re ready to apply when ‘a webinar sponsored on September 30 by Farm Credit East.
“The important thing to remember now is that forgiveness is not automatic,” Pirro said. “There are a lot of details that a borrower has to follow on the forgiveness request in order to get the loan forgiveness.”
Qualifying is not difficult, but providing the required documentation can be tricky, so it’s important to read and understand the rules, and maybe work with a consultant to make sure everything is done correctly. she declared.
Borrowers have 24 weeks to spend the loan money they receive, unless the loans were received after July 17. In this case, the coverage period ends on December 31.
But all borrowers have 10 months after their 24-week coverage period to request a rebate.
“Much of the payroll documentation won’t be available until early January, so no one who has borrowed PPP funds will miss a deadline this year,” Dickinson said. “Most pardon requests will take place in early 2021. It will be a busy season for filing documents, slightly more than usual this year.”
“If there’s a year for tax planning, this is it,” Pirro said.
Congress says PPP money is not income, but the Internal Revenue Service says expenses paid with forgiven debt are not deductible.
“There are still a lot of questions, like if this loan is canceled in 2021, what will happen with the expenses in 2020?” she said. “Are we going to have to go back and amend ourselves?” Don’t be surprised if you have to share money with the government.
Pirro and Dickinson advised auditors to start scheduling meetings with tax professionals now and start working on potential scenarios
“Understand what the likely outcomes will be,” she said. “One thing we can say, 2020 has been a typical year. With all the nuances that come with preparing and planning tax returns, let’s put the real numbers in place so we know exactly what to expect. Let’s not guess and be surprised.
Businesses requesting a loan forgiveness must submit forms to their lender, who reviews the request for quality control to ensure it is complete.
Once done, the lender then sends the request to the SBA, which has three options. It can:
• Approve the forgiveness request and send money to the lender to repay the loan amount plus interest.
• Deny the request the borrower can appeal.
• Approve the partial pardon, which is also subject to appeal.
One possible reason for only getting a partial forgiveness is that the PPP borrower has also received some other type of government funding, such as an economic disaster loan from the SBA. For example, if a farm received $ 8,000 in EIDL money, its PPP loan could be canceled less the $ 8,000 it received under the EIDL program.
It is possible that some rules will be changed, but this is highly unlikely before election day in November.
“This is the most unusual election year I have ever seen,” Dickinson said. “We have to wait until the end of the process. The rule of thumb with estate planning is that you plan according to the rules today, not what you plan for tomorrow. It’s the same with this program.
“You still have time to organize yourself and get it right the first time,” he said. “Most of you will be applying in the first quarter of 2021. This is probably the time frame when you will be submitting your P3 forgiveness request. If the IRS wants to clarify things, it should be done by then. Let’s just hope 2021 is a lot better and a lot different. “