Should I Apply For the PPP Loan Forgiveness Right Now in 2020 or Defer?


The Paycheck Protection Program (PPP) was created as a result of the COVID-19 pandemic. It is a part of the Coronavirus, Aid, Relief, and Economic Security Act (CARES Act). Many business owners are wondering if they should apply for the PPP loan forgiveness or defer in 2020.


PL Consulting has helped many employers apply for the PPP loan and assisted others when deciding not to. Here is our expert advice on the pros and cons of applying before the end of 2020.




PPP Background Information

The PPP has helped businesses both large and small ever since it was enacted on June 5, 2020. If you apply for it, all the money that you have borrowed will be forgiven. Payroll costs include all forms of cash compensation paid to employees, including tips, commissions, bonuses, and hazard pay. The forgivable cash compensation per employee is limited to $100,000 annually.


The uncertainty that many employers are having right now is that they want to defer payroll taxes, but still hope and expect to get a PPP loan at some point. Some taxpayers want to avoid IRS penalties that may come with deferring payroll. Others are deferring payroll taxes intending to repay them if they ultimately get loan forgiveness under a PPP loan.


Employers who obtain PPP loans may defer the deposit of payroll taxes until the employer receives a decision from its lender that all or any portion of their PPP loan is forgiven.

Once loan forgiveness has occurred, the employer must resume timely payroll tax deposits. The amount that was deferred through the date that the loan was forgiven will continue to be deferred. Half of the deferred amount will be due on December 31, 2021, and the other half will be due on December 31, 2022.


Our PPP Recommendation

Instead of rushing to apply, consider how much adequate preparation will help you in the decision-making process. If you wait to apply for the PPP loan, there also may be financial benefits for borrowers. There will be additional information and guidance available to you. The loan forgiveness process has been frustrating for many employers, so the longer you wait, the more established the system is.


There is a PPP FAQ page that was recently updated in October. This page has great information that may help with your decision-making process.


Do You Have Additional PPP Questions?

We understand many factors go into your decision as a borrower and employer. We suggest that you discuss your decision with a CPA or legal counsel before submitting your application.

PL Consulting is committed to helping each one of our current and future clients with their business finances and bookkeeping. We are continuously researching up-to-date information on the Paycheck Protection Program. We are available for all the questions you have about the PPP loan forgiveness and deferring. If you would like to set up an appointment, call us at 410-764-3731.

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