The terms of an unforgiven PPP loan are extremely generous, with only 1% of interest, paid back over two years, and with no other borrower or prepayment fees.

However, if taxpayers should follow these steps to ensure their PPP loan's forgiveness.

1.Review what loan uses will be forgiven.
Generally speaking, all the Lenders will forgive your PPP loan if Taxpayers spend 100 percent of the funds on payroll, mortgage interest, rent, and utilities in the eight weeks after receiving the loan. Taxpayers must spend at least 75 percent specifically on payroll. The other 25 percent can be divided up between rent, utilities, and mortgage interest (if applicable).

Loans can be used to cover existing debt obligations, such as credit card payments, but these payments will not entitle the taxpayers to receive loan forgiveness on those costs.

2. Understand how your loan forgiveness can be reduced.
There are two main actions that will reduce your loan's forgiveness:

Using more than 25 percent of your loan on non-payroll costs: In this case, your maximum forgivable amount will be equal to payroll costs divided by 0.75.

Reducing head count or "material" salary: To maintain 100 percent forgiveness, you'll need to either keep your payroll as it was before February 15, 2020, or hire back and undo wage reductions by the end of the PPP "covered period" on June 30. The total amount forgiven will be reduced proportional to the reduction in head count, or decreased by the total amount of reduced salary if you cut an employee's wages by more than 25 percent.

If you laid off employees or reduced their wages and then received a PPP loan, it's time to hire them back or reinstate their salary. Every dollar that you don't spend on doing so is a dollar you will need to repay, plus interest.

3. Document all of your loan expenses.
Taxpayers are required to document every expense item that were paid from the PPP Loan's. This documentation must be provided to the Lending institution when it's time to apply for loan forgiveness, .

Documents verifying the number of full-time equivalent employees on payroll, and their salary/wages for the period you used the loan to pay them. These could include payroll reports from a payroll provider, payroll tax filings, income/payroll/unemployment insurance filings from your state, and paperwork that verifies retirement and health insurance contributions.

Documents showing payments of mortgage interest, rent, and utilities should also be maintained and produced to the Lender. These could include canceled checks, payment receipts, or account statements.

Sole proprietors and other self-employed workers can use loan proceeds to replace lost income (up to $100,000 annualized), but if you do this, the remainder of your loan must be used on non-payroll costs in order to qualify for full forgiveness.

4. Follow the specific lender's guidelines.
It's important to understand that the SBA oversees this program and gives the final approval on all PPP loans, and that approval goes through the Lender Banks. The lender Bank may ask for additional documentation, but, that your lender must give you a response to the loan forgiveness request within 60 days of receiving it.

It's important that taxpayers clearly understand their respective lender's rules for loan forgiveness at the time the loan was granted and funded. The The taxpayer should also check periodically with the Lender with respect to their rules for Loan Forgiveness.

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