• Finance

Request PPP forgiveness before it's too late

The Paycheck Protection Program (PPP) has been a lifeline for many freelancers and small businesses who experienced a loss of revenue due to the COVID-19 pandemic. Over the past year, the program was expanded several times to allow more participants to take part in it and receive funding — the government even made the loans forgivable.

This was, and still is, great news for cash-strapped freelance business owners. However, there were always at least two key caveats for those taking PPP loans: 1) the funds had to be used for qualified expenses (see the list below) and 2) as a recipient, it is your responsibility to ask your lender for forgiveness within 10 months after the end of your covered period (24 weeks for most loan recipients).

This 10-month window is closing rapidly for some freelancers, especially if you received first-round funding. Most banks are now accepting applications for PPP loan forgiveness so be sure to contact your lender. Otherwise, you will have to start repaying your PPP loan. You can find full details on loan forgiveness requirements on the Federal Register website.

The following is a quick summary of what are considered Eligible Expenses for PPP Loan Requirements:

The first PPP round loans included eligible expenses like utilities, rent, payroll, employer-sponsored health insurance, and other expenses, which are also covered in this second round.

The second round of PPP funding also included four categories of additional covered expenses:

1. Operational expense such as cloud computing, HR, and accounting software.

2. Property damage costs for damages caused by public disturbances in 2020 that were not covered by your business insurance.

3. Supplier costs for payments made to suppliers before taking the PPP loan that were essential for keeping your business running.

4. Worker protection costs for PPE and other investments made to abide by local and federal COVID-19 business guidelines.

PPP loan forgiveness amounts are not taxable on a federal level; check your state taxation rules. The PPP loan amount that you get forgiven will not be considered taxable income at the federal level. This could be a significant tax saving for your business. However, there is not any change in the guidance for state and local tax treatment of PPP funds. Therefore, be sure to check with your own state and local tax authorities for additional information.

It’s imperative that if you received PPP funds for your freelance business, you must take action to request forgiveness from your lender within the 10-month window noted above and ensure that you have all of the required documentation to process the forgiveness application. Failure to do so means that you will be on the hook for repaying the loan and any accrued interest—a burden that no freelancer and business owner wants to bear, especially as we work to emerge from the COVID-19 pandemic period.

Jonathan Medows is a New York City-based CPA who specializes in taxes and business issues for freelancers and self-employed individuals across the country. He provides tax, accounting and business articles for freelancers on his website,, which also features a blog and a comprehensive freelance tax guide. Please note, due to the high volume of inquiries in regard to COVID-19, Jonathan is not able to respond to COVID related requests. However, he is more than happy to chat about 2020 tax filings.

Jonathan Medows Jonathan Medows is a NYC-based CPA who specializes in taxes for consultants across the country. His website has a resource section with how-to articles and information for freelancers.

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