If you received a letter from the SBA denying your forgiveness request for your PPP loan within the last 30 days, the clock is ticking. You have 30 days to respond and file your appeal. The timeline for SBA forgiveness appeals is inflexible. Once your initial 30-day period expires you will lose your right to appeal SBA’s denial to forgive your PPP loan.
We strongly recommend you hire an attorney to represent your company in the SBA appeal process. The ONLY individuals who can represent your company in the appeal process are: An owner, a company officer, or an attorney. CPAs are not authorized to represent borrowers in the appeal process.
Steps you must take to appeal your SBA Loan Forgiveness Denial
- Review “Final SBA Loan Review Decision Letter”
- Confirm your deadline to appeal the SBA decision
- Gather your documents & facts to identify issues to raise in your appeal
- Review SBA’s prior legal decisions & rulings
- Draft your Appeal (max 20 pages) and include exhibits (your evidence) and SBA’s Final Loan Review Decision Letter.
*You must include your legal arguments, facts, and legal authority to support your position to show SBA’s denial was “clearly erroneous” (there are additional requirements – see SBA’s website). - Create an online account at appeals.sba.gov.
- Answer all questions truthfully and completely when responding to SBA’s online questionnaire.
- Identify a legal representative for your business to handle the SBA Appeal.
- Upload your appeal, exhibits, and SBA Final Decision Letter.
Get Help With Your PPP Loan Forgiveness Appeal Now
Complete the form, and a member of our staff will contact you shortly. We strongly recommend retaining an attorney to represent your company and prepare and file your formal appeal.
SBA PPP Loan FAQs & Tips
Compliance, deductions, forgiveness, employees, the CARES Act has offered support and raised many questions. The experienced team at Milikowsky Tax Law is here to sort through all of the information and give you facts and strategies for your business as you resolve your SBA loan forgiveness.
If my PPP loan is eventually forgiven, can I deduct expenses on my tax return that I paid with my PPP loan?
Currently, IRS published Notice 2020-32 that prohibits deducting expenses if paid with a forgiven PPP loan.
Does the CARES Act exclude from payroll costs employee compensation greater than $100k?
Yes. However, the exclusion only applies to cash compensation and does not apply to all employee benefits such as contributions to a defined benefit retirement plan, group health care coverage, and payment of state/local taxes assessed on compensation.
Can a business include payments to an independent contractor or sole proprietor in the calculations of payroll costs?
No. The independent contractor or sole proprietor is itself potentially eligible for a PPP loan if it satisfies the requirements.
What rules should I rely on to ensure my business complies with the PPP requirements?
A borrower may rely on the laws, rules and guidance available when it submitted its application through the time its application was accepted.
Are there any restrictions on which employees are paid with SBA PPP loan funds?
Yes, employees need to have their “principal place of residence” in the United States.
To determine borrower eligibility for the “500-employee threshold” per the CARES Act, should a borrower count all employees or only full-time equivalent employees?
For purposes of loan eligibility, borrowers must calculate the total number of employees including part-time employees. For purposes of “loan forgiveness,” employers must use “full-time equivalent” employees to determine the extend the forgiveness amount will be reduced for workforce reductions.
Will SBA review all loans to ensure loans were provided to eligible borrowers?
Yes. SBA, in consulting with the Department of the Treasury, will review all loans greater than $2 million (as well as other loans) after a borrower submits a loan forgiveness application to ensure PPP loans were provided to eligible borrowers.
Will SBA review PPP loan of $2M or greater to ensure borrowers accurately and truthfully certified that “current economic uncertainty makes this loan request necessary to support the ongoing operations…”?
Yes. However, a safe harbor provision applies to SBA’s review of PPP loans. Borrowers with an original principal amount less than $2M are deemed to have made the required certification regarding the necessity of the loan request in good faith. Borrowers with loans greater than $2M must be able to substantiate their certification in good-faith. If SBA determines a borrower lacked adequate basis for the required certification, SBA will seek repayment. SBA indicates it may not pursue administrative enforcement or referrals to other agencies (i.e. IRS) if the loan is repaid. However, there is no guidance at this time regarding the amount of time to repay the loan once SBA determines a borrower was not eligible for the loan.
Can an individual who is a partner in a partnership or member of an LLC file a separate application for an SBA PPP loan?
No. The PPP loan must be filed by the partnership or LLC. Only individuals who are self-employed or sole proprietors who filed a Form 1040 Schedule C for 2019 are eligible to file a PPP loan application if they were in operation on February 15, 2020 and their principal place of residence was in the U.S.
What expenses can be paid with an SBA PPP loan?
Owner compensation replacement (calculate based on 2019 net profit); employee payroll costs for employees whose principal place of residence is in the U.S.); mortgage interest payments (not mortgage repayments or principal payments) on any business loan on real or personal property (i.e. warehouse or vehicle used to conduct business); business rent payments; business utility payments. For these expenses to be “permissible,” you must be entitled to claim these expenses on your Form 1040 Schedule C. Additionally, interest payments on any other business debt incurred before February 15, 2020 can be paid with PPP loan funds but these amounts are not eligible for PPP loan forgiveness.
Is there a limitation on the “allowable” use of the SBA PPP loan funds?
Yes, for self-employed individuals who file a form 1040 Schedule C, allowable uses for the funds are the type of expenses incurred and paid in 2019. The purpose for the PPP loan is to “maintain existing operations and payroll.” It is not for business expansion. Additionally, at least 75 percent of the PPP loan proceeds shall be used for payroll costs. Other restrictions and conditions may apply.
Is there a deadline to pay expenses with the PPP loan funds?
Yes, you have 8 weeks to use the loan funds starting with the date of the first disbursement of the SBA PPP loan.
Can you apply for an SBA PPP loan if you received an SBA EIDL loan from January 31, 2020 through April 3, 2020?
Yes, you can apply for a PPP loan. If your EIDL loan was not used for payroll costs, it does not affect your eligibility for a PPP loan. If your EIDL loan was used for payroll costs, your PPP loan must be used to refinance your EIDL loan. Proceeds from any advance up to $10,000 on the EIDL loan will be deducted from the loan forgiveness amount on the PPP loan.
What amounts paid with PPP loan funds are eligible for forgiveness?
Payroll costs including salary/wages and tips up to $100k of annualized pay per employee (max $15,385 per individual for the 8 week period) including covered benefits for employees (not owners) and including health care expenses, retirement contributions, and state tax imposed on employee payroll paid by the employer (i.e. unemployment insurance premiums). Additionally, payments for owners compensation (calculated based on 2019 net profit, limited to 8 weeks worth (8/52) of 2019 net profit) excluding qualified sick leave equivalent amount where a credit is claimed under section 7002 of the Families First Coronavirus Response Act or qualified family leave equivalent amount where a credit is claimed under section 7004 of FFCRA. Lastly, the following payments are eligible for forgiveness to the extent they are deductible on Form 1040 Schedule C: i) interest on mortgage obligations on real or personal property (incurred before February 15, 2020); ii) rent business rent payments (leases in force before February 15, 2020); iii) and business utility payments (under service agreements before February 15, 2020).
CPA vs Tax Attorney: What’s the Difference?
In some cases, it may be difficult to distinguish what your CPA is capable of helping you with and which tasks are better suited for a tax attorney. Both are experts when it comes to tax matters but in different ways.
While your CPA is an expert at preparing and submitting your taxes correctly, you’ll need a tax attorney in the event that Internal Revenue Services (IRS) notices inconsistencies in your tax submissions or if you’re the subject of an audit. In any case, you’re best off having access to both experts.
What does a CPA do?
A Certified Public Accountant (CPA) has a significant educational background under their belt. They are required to have completed 150 hours or more of undergraduate educational studies before passing an extensive CPA examination.
Additionally, they have to commit to 120 hours of continued education every 3 years. As such, they are considered some of the highest-level experts when it comes to handling tax preparation. A simple way to think of CPAs is that all CPAs are accountants, but not all accountants are CPAs. The process of becoming a CPA is more complex than an average accountant.
A CPA’s services are not often used by any average taxpayer but instead are usually used in more complex cases. CPAs know how to abide by federal laws while still minimizing your tax liability and maximizing benefits. Developing a strong ongoing relationship with a CPA may suit your needs if you are looking to build a long-term tax plan and need support sticking to it.
CPAs are often capable of providing various services to their clients in addition to tax preparation. Some additional services they may provide include the following:
Many people choose to have a go-to CPA available for support on a regular basis. If this is not the case for you, you may choose to consult them when:
Their skills and expertise are best suited to assist you when handling these situations.
What does a tax attorney do?
While a tax attorney is still an excellent resource to taxpayers, they serve a different set of needs than CPAs. While CPAs are technically qualified to represent you before a court in the event of an audit, a tax attorney is likely a better choice in situations where you may be involved with trouble with tax authorities.
Similar to CPAs, tax attorneys have to complete an intensive educational path before qualifying to satisfy their role. After completing a bachelor’s degree, they must complete a Juris Doctor degree and study to take the bar exam for the state in which they intend to practice. Once they have passed the bar exam, their license must be kept up with continued ongoing education. On top of that, many tax attorneys choose to pursue a Master of Laws in Taxation to further their specialization in their field.
Tax attorneys specialize in the legalities of tax payment and their services are most often called upon in defense cases when taxpayers are faced with audits from IRS, EDD, or other federal tax authorities. While tax attorneys may have slightly varying specialties, one thing most tax attorneys have in common is expertise in tax controversy and dispute resolution.
One of the benefits of working with a tax attorney is that only tax attorneys have an attorney-client privilege that protects communication between a client and an attorney. This privilege can restrict IRS and California State tax agencies from discovering information provided to attorneys in confidence.
Tax attorneys fulfill various services for their clients as previously mentioned. The following include the various reasons you may need to consult a tax attorney:
Compliance with Federal State and Local Regulations CPA vs Tax Attorney
Another difference between CPAs and tax attorneys is their role in complying with regulations. The American Institute of Certified Public Accountants (AICPA) recently came out and said that the Corporate Transparency Act requires legal advice to comply with the new forms. The act requires that the beneficial owner of real estate be disclosed to the IRS and FinCEN. If a piece of real estate is owned by multiple entities, the IRS wants to find out who is the beneficial owner pulling the strings and controlling the real estate. The AICPA has taken a hard stance on this and said that it’s something that CPAs should not do, and instead, tax attorneys should provide the necessary legal advice.
Who can represent your business during an SBA PPP Loan Forgiveness Appeal?
SBA has started giving loan forgiveness for businesses that used the PPP loans during the early stages of the pandemic. However, businesses deemed to have not used the funds as they were intended received loan forgiveness denials.
If SBA denied your business’s loan forgiveness application, they will send an SBA Final Decision Letter in the mail. If you wish to appeal your forgiveness denial, you must reply and submit an under-20-page appeal 30 days before the date printed on the decision letter. Submission after the 30-day mark forfeits your appeal rights and will require you to repay the full PPP loan amount.
Only three people can legally represent your business during an SBA PPP Loan Forgiveness Appeal:
Those who are not legally entitled or allowed to represent businesses during an SBA appeal include:
An attorney is legally entitled and allowed to represent your business during the appeals process. They will be able to research why your application was denied, collect supporting evidence, and create the 20-page appeal for SBA.
Final Thoughts
While CPAs and tax attorneys both work within a similar framework, their unique specialization equips them for varying roles. In some cases your business may only need to use the services of one or the other, however, in most cases, the two roles complement one another. While your CPA may be an excellent ongoing partner to assist with the day-to-day management and filing of your taxes, they may not be the best-suited partner in the event of trouble with tax authorities.
Rather than challenging your CPA to attempt to manage tasks outside of their usual specialties, reach out to an expert attorney to assist with any legal tax concerns you may have. Curious about what you should be paying for a tax attorney? Read our article here explaining different instances when hiring an attorney may be worth your while.