Will I Go to Jail for Mistakes on My PPP Paperwork?

Will I Go to Jail for Mistakes on My PPP Paperwork?

Getting a Paycheck Protection Program (PPP) loan during the pandemic seemed like a good idea at the time. The loans offered a lifeline to struggling small businesses to help cover payroll, rent, utilities and other expenses. But now you may be worried that mistakes on your paperwork could land you in legal trouble. It’s a fair concern in the aftermath of high-profile cases of PPP fraud. However, minor errors don’t necessarily mean you’ll face prosecution or jail time. Let’s break down the risks and realities.

Common PPP Mistakes

First, know that you’re not alone. Many business owners made innocent mistakes on their original PPP loan applications and forgiveness paperwork. Some of the most common errors include:

• Overestimating payroll expenses
• Including non-eligible expenses
• Missing documentation
• Incorrect calculations

These issues typically happen because of the PPP program’s quick rollout and shifting rules. It was confusing! As this Reddit thread shows, many fellow business owners also struggled with the process.

What Triggers an Audit or Investigation

Minor mistakes generally won’t raise red flags. But significant errors could spur SBA to audit your loan or forgiveness application. Things that may prompt scrutiny include:

• Obviously inflated payroll numbers
• Suspicious calculations or documentation
• Multiple PPP loans for a single business

Essentially, the more your paperwork diverges from reality, the more likely you are to get reviewed. Deliberate attempts to mislead will get referred to the SBA Inspector General for potential investigation.

What Does a PPP Audit or Investigation Entail?

If the SBA selects your loan for review, you’ll have to provide documentation to validate your eligibility, need and use of funds. This may include:

• Payroll records
• Bank statements
• Tax filings
• Lease/mortgage payments
• Utility bills

You’ll need to respond to their requests in a timely manner. If the SBA determines you were ineligible or misused the funds, you may have to repay the loan. Penalties and interest may also apply in some cases. If fraud is suspected, your case could get referred for criminal investigation.

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2024-03-21

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When Does it Become Fraud?

Mistakes happen, but purposefully providing false information to get a PPP loan or forgiveness is fraud. This includes:

• Fabricating payroll/expense documents
• Claiming payroll for fake employees
• Using funds for personal purchases
• Lying on applications about # of employees or revenue

Attempted fraud carries severe civil and criminal penalties. Charges may include wire fraud, money laundering, and making false statements. Punishments can include 5-30 years in prison, restitution, and hefty fines.

Tips to Amend Mistakes

If you discover errors after receiving PPP funds, take action to correct them. Being proactive can help demonstrate good faith.

• Work with your lender to update paperwork
• Repay any funds you were ineligible for
• Ask an attorney about amending previously submitted applications

The SBA may allow you to keep some or all of the loan, even if you were technically ineligible, based on the circumstances.

When to Get Legal Help

If you receive an audit letter or inquiry from the SBA Inspector General regarding your PPP loan, consult a lawyer immediately. An experienced attorney can help you:

• Respond to inquiries and provide requested documentation
• Correct mistaken or questionable entries
• Negotiate to minimize penalties
• Defend against criminal charges if fraud is alleged

The laws around PPP loans are complex, so you need professional guidance to avoid incriminating yourself. In most cases, the SBA just wants to verify eligibility and appropriate use of funds. So if errors were honest mistakes, an attorney can help set the record straight.

The Bottom Line

Honest mistakes on PPP paperwork are generally not cause for jail time. But significant errors or purposeful fraud can lead to criminal prosecution. If you receive an inquiry letter from the SBA related to your PPP loan, consult a lawyer right away. An experienced attorney can help you demonstrate good faith, correct innocent mistakes, negotiate repayment terms if needed, and defend you if allegations of fraud arise.

Resources

• SBA Paycheck Protection Program
• PPP Loan Forgiveness – FindLaw
• What Triggers a PPP Loan Audit (YouTube Video)