PPP Expenses not Deductible

The IRS has come out with Revenue Ruling 2020-27, which gives us some direction on how to treat the PPP loan and the related expenses.

Lets look at each separately.

If your business received the PPP loan and it is forgiven, that money is considered non-taxable income.

However, the expenses that your business listed to qualify for forgiveness (payroll, utilities, etc) are not deductible in 2020.

 Revenue Ruling 2020-27 clarifies that these 2020 expenses that were used to apply for forgiveness are not deductible, even if the PPP is not forgiven until 2021, as long as you reasonably expect the PPP to be forgiven.

 This is the way that the law currently stands.  There is some talk in Congress about changing the law and making these expenses deductible, but as of this writing, that is still just talk.

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PPP LOANS OF 50k OR LESS

Paycheck Protection Program (PPP) borrowers of $50,000 or less now have an opportunity to apply for forgiveness using a simplified application that has been released.

Loans of less than $50,000 are now exempted from any reductions in forgiveness based on reductions of employees or reductions in wages.

https://www.sba.gov/sites/default/files/2020-10/PPP Loan Forgiveness Application Form 3508S.pdf

PPP LOAN UPDATE

Have you gotten a notice that your PPP loan payments are starting to come due?

Those payments may now be deferred – take a look at the following article.

https://www.journalofaccountancy.com/news/2020/oct/ppp-loan-repayments-deferral-period.html?utm_source=mnl:cpald&utm_medium=email&utm_campaign=08Oct2020

If you have any questions about your PPP loan, or need help with forgiveness, please give one of our CPAs a call!

Payroll tax deferral update

On August 8th, the President issued a presidential memorandum that would allow employers to defer the employee’s portion of payroll taxes.

On Friday August 28th, the IRS issued guidance regarding this deferral.

From Sept 1, 2020 to December 31, 2020, employers can defer the withholding, deposit, and payment of the employee portion of the OASDI tax (typically called the Social Security tax).

HOWEVER – this is just a deferral.  Under the guidance, employers will need to start withholding and depositing the deferred tax beginning January 1, 2021 through April 30, 2021.  This effectively means that the employee will have double the social security tax withheld (one as a part of the normal payroll, and then the additional amount that was deferred) from January to April 2021.

Additionally, this deferral only applies to any employee whose pretax wages during any biweekly pay period is less than $4000.

There is no guidance for what to do if an employee is no longer employed in 2021 and took advantage of the deferral.

Is this right for you?  Give one of our CPAs a call to discuss!

Presidential Order on Payroll Taxes — FYI

On August 8th, the president issued a memorandum that will suspend certain employee payroll taxes from September 1, 2020 to December 31, 2020.  There are still questions on the details of the memorandum, and we will update you on our blog as we get those answers.  Of course as always, if you have any questions, please contact your CPA or your paraprofessional.

Forgiveness of PPP

The laws are still changing on the forgiveness of PPP loans, if you have questions we advise to contact the bank your PPP loan is through.  Most likely the best advice is to wait.

DEADLINE TO FILE FOR PPP LOAN

Last day to apply to receive a PPP loan is June 30th!

Although the statutory language is a bit murky, a June 8th joint news release by Treasury Secretary Mnuchin and SBA Administrator Carranza said the SBA and Treasury will provide rules to “confirm that June 30,2020 remains the last date on which a PPP loan application can be approved.”

(Please note that this is referring to getting a PPP loan, not getting your PPP loan forgiven)

If you have not yet received your PPP and you want to, you need to start the process with your bank ASAP!

PPP Forgiveness Update

We are hopefully getting more clarity regarding forgiveness of the PPP loans.  However, many businesses are getting close to the end of your 8 week period, and action is needed soon.

Our overarching advice would be:

  • Plan out your spending for the 8 weeks.  Be intentional about how you spend the money so that you get the maximum possible forgiveness.  (By the way, see below – the bill in Congress would extend the 8 week period)
  • Be in touch with your bank.  The forgiveness application will be done through the bank that issued the PPP loan.
  • If it is looking like some of your PPP will not be forgiven:
    • Wait.  There is currently a bill in Congress (as of 6/3/20, it has already passed the House and it is in the Senate) that will ease the rules.  Our reading of this bill will be that it will solve many of the gotchas that have been keeping our clients from receiving full forgiveness.
    • Get in touch with us.  The forgiveness application is confusing, and if you have any complexity in your situation at all, it may be difficult to apply the rules correctly.  There may be something that you are overlooking that would fix the issue.

PPP FORGIVENESS

Information regarding the PPP and its forgiveness is coming out daily.  The best place to keep up to date on the most current rules is here:  https://home.treasury.gov/policy-issues/cares/assistance-for-small-businesses