If you borrowed through Bank of America PPP loan forgiveness is still available: you apply digitally through the bank’s portal (or through the SBA’s direct forgiveness portal), you have up to five years from the date the SBA issued your loan number to file, and at least 60% of the forgiven amount must have gone to payroll. Borrowers who included payments to 1099 contractors in their loan amounts are also caught up in ongoing litigation, and that piece is worth understanding before you finish your application.
Applying Through Bank of America
Bank of America accepts forgiveness applications only through its online portal. Paper applications are not accepted.1Bank of America. Small Business Paycheck Protection Program FAQs You reach the portal through Business Advantage 360 or CashPro, using the same credentials you had when you took out the loan.2Bank of America. PPP Forgiveness Eligible clients receive an email with a direct link to their application. If that email has been lost, you can retrieve it from the “Alerts History” section inside Business Advantage 360.
Which form you use depends on the loan size:
- Loans of $150,000 or less: SBA Form 3508S. The bank estimates about 15 minutes to complete, and no documents generally need to be uploaded at the time of submission, though records must be retained in case the SBA later asks for them.2Bank of America. PPP Forgiveness
- Loans above $150,000: either Form 3508EZ (if you meet the eligibility criteria in its instructions) or the standard Form 3508, plus supporting payroll and non-payroll documentation.1Bank of America. Small Business Paycheck Protection Program FAQs
The bank recommends completing the applicable SBA form and gathering documentation before logging into the portal. For help, call 866-457-4892, Monday through Friday, 8 a.m. to 8 p.m. Eastern.
Applying Through the SBA Direct Portal Instead
You are not required to file through Bank of America. Since March 2024, the SBA’s direct forgiveness portal has been open to all PPP borrowers regardless of loan size or lender.3SBA. PPP Loan Forgiveness Requests submitted there are routed automatically to your lender for review.4SBA. PPP Direct Forgiveness Portal The questions correspond to the same Forms 3508, 3508EZ, and 3508S. One practical difference: the SBA portal lets you track application progress inside the system, while applications filed through Bank of America require contacting the bank for status updates.
The Five-Year Deadline and the 10-Month Rule
The PPP itself closed to new applications on May 31, 2021, but existing borrowers may still apply for forgiveness at any time up to five years from the date the SBA issued the loan number.3SBA. PPP Loan Forgiveness That five-year window is a hard deadline.
A separate, shorter deadline governs loan payment deferral. If you apply for forgiveness within 10 months after the last day of your covered period, you make no loan payments while the application is pending.3SBA. PPP Loan Forgiveness Miss that window and deferral ends, so monthly payments begin.
What Happens If Part of the Loan Isn’t Forgiven
Any unforgiven balance carries a 1% interest rate with no prepayment penalty. Loans originated on or after June 5, 2020, have a maturity of at least five years. Loans disbursed earlier have a two-year maturity, though the lender and borrower can mutually agree to modify that term.5U.S. Treasury. PPP Loan Forgiveness FAQs Borrowers who neither apply for forgiveness nor make payments will be in default and may be referred to the Treasury Department for collection.
Eligible Expenses and the 60% Payroll Rule
To qualify for full forgiveness, loan proceeds must have been spent on eligible expenses during a “covered period” of either 8 or 24 weeks beginning on the disbursement date. Borrowers who received their loan before June 5, 2020, can choose between the two lengths. Everyone else uses the 24-week period by default.5U.S. Treasury. PPP Loan Forgiveness FAQs The election is made on the forgiveness application itself.
Eligible costs fall into two buckets. Payroll costs include salary, wages, commissions, tips, cash compensation, employer contributions to health insurance, and retirement plan contributions. Non-payroll costs include business mortgage interest, rent or lease payments, and utilities, provided the obligation or service existed before February 15, 2020.6U.S. Treasury. PPP Forgiveness Factsheet Later guidance added covered operations expenditures, supplier costs, property damage costs, and worker protection expenditures.7U.S. Treasury. PPP IFR Loan Forgiveness Requirements
The ratio that trips up most borrowers: at least 60% of the forgiveness amount must have been spent on payroll. Non-payroll costs cannot exceed 40% of the forgiven total.7U.S. Treasury. PPP IFR Loan Forgiveness Requirements If you fall short of 60% on payroll, partial forgiveness is still available, but the forgivable amount is reduced so that the ratio holds.
Retain all PPP-related documentation for six years after the loan is forgiven or repaid in full.6U.S. Treasury. PPP Forgiveness Factsheet
Tax Treatment
Forgiven PPP amounts are excluded from gross income for federal tax purposes, and expenses paid with forgiven funds remain fully deductible federally.8Tax Foundation. State Tax Treatment of Forgiven PPP Loans
State treatment varies. Most states follow the federal approach, but some conform to an older version of the Internal Revenue Code and may either treat the forgiven amount as taxable or deny deductions for related expenses. California excludes the loan from income but restricts expense deductions for publicly traded companies and businesses that did not experience at least a 25% decline in gross receipts.9California Franchise Tax Board. Paycheck Protection Program Loan Forgiveness Virginia allows deductions only for the first $100,000 of related expenses.8Tax Foundation. State Tax Treatment of Forgiven PPP Loans
Lawsuits Over 1099 Contractor Expenses
Multiple lawsuits allege Bank of America misled small business borrowers into including payments to independent contractors (1099 workers) in their PPP loan amounts, even though the CARES Act did not allow those costs to count toward forgiveness. Two cases matter most if you’re an affected borrower.
Modern Perfection LLC v. Bank of America
Filed August 22, 2022, this suit was brought by a Maryland home remodeling business and a Washington home renovation business under the North Carolina Unfair and Deceptive Trade Practices Act. The plaintiffs alleged the bank instructed them to include 1099 worker expenses to inflate loan amounts (and the bank’s commissions), without disclosing that those expenses could not be forgiven. The Maryland business received a $37,500 loan and was later told only $179 was forgivable; the Washington business received $32,927 and was told only $1,216.67 qualified.10ClassAction.org. Bank of America Misrepresented PPP Loan Forgiveness, Lawsuit Alleges
In January 2025, a three-judge Fourth Circuit panel affirmed a Maryland federal court order compelling arbitration. The panel held that the borrowers’ deposit agreements contained a valid, enforceable delegation clause requiring an arbitrator to decide all disputes, including whether the arbitration provision itself applied. The court noted the borrowers had signed two contracts, a deposit agreement (with arbitration) and a promissory note (without), but failed to properly argue in their briefs that the two contracts conflicted.11ABA Banking Journal. 4th Circuit Upholds Arbitration in PPP Loan Lawsuit Against BofA As a practical matter, affected borrowers in that case must pursue individual arbitration rather than class action.
March v. Bank of America (Kansas)
A separate class action, March et al. v. Bank of America, N.A., Case No. 2:23-cv-02360-EFM-TJJ, is pending in the U.S. District Court for the District of Kansas and has moved toward resolution. A final approval hearing for a proposed settlement was scheduled for December 4, 2025, with a November 10, 2025 deadline for class members to opt out, object, or dispute the settlement amount.12PPP Settlement. PPP Settlement Bank of America has maintained that it processed loans based on borrower representations and that following SBA rules on loan amount eligibility was the borrower’s responsibility.13American Banker. Businesses Allege Bank of America Pressured Them to Take Out Bigger PPP Loans
Audits Can Come After Forgiveness
A forgiveness approval does not close the file. The SBA has stated it may begin a review of any PPP loan, of any size, at any time, covering borrower eligibility, loan amount accuracy, how proceeds were used, and whether forgiveness was properly granted.3SBA. PPP Loan Forgiveness Even borrowers who used the streamlined Form 3508S and uploaded nothing must be ready to produce records on request.
The volume is real. Of the more than 10.5 million PPP loans totaling over $750 billion that have been forgiven, 37,938 loans totaling roughly $4.6 billion have been flagged under the SBA’s “hold code 70” as potentially ineligible, meaning forgiveness could be clawed back after further review.14SBA. SBA Report 25-12: Actions to Address Forgiven PPP Loans Subsequently Flagged as Potentially Ineligible About two-thirds of the flagged loans are for $25,000 or less, which the SBA may consider immaterial for recovery, but the review process for all flagged loans remained incomplete as of mid-2024. PPP loan fraud carries a statute of limitations of up to ten years, so keep your documentation regardless of the forgiveness letter in your file.