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Posted On: December 13, 2020

Tax & PPP Loan Update--Upcoming webinar with Tax Attorney Jack Sullivan

Tax & PPP Loan Update–Upcoming webinar with Tax Attorney Jack Sullivan

Please see the message below for an update on tax implications due to PPP loan forgiveness, from Jack Sullivan with Sullivan & Associates, P.C.  Jack will be joining us for a webinar next month, to discuss updates to tax guidelines for the moving and storage industry, and to answer any questions you might have.  Details for this seminar coming soon!!!!

 

TAX and PPP UPDATE

 

PPP Loan Tax Treatment Update

 

The IRS has recently issued a ruling, IRS – Rev Rul. 2020-27, stating that businesses that get their PPP loan forgiven in 2020, or have a REASONABLE EXPECTATION of forgiveness in the near future, cannot claim a tax deduction for the eligible expenses paid during the 2020 taxable year.

 

In other words, if you took out a PPP loan, and used the proceeds for covered expenses like payroll, rent, and utilities, and reasonably expect that you would get forgiveness for the loan, even if you don’t apply for forgiveness this year, you need to treat the loan as forgiven in 2020.

 

As a result, any covered expenses that are paid using a PPP forgiven loan, for which no cancellation of debt income (COD) results, are not allowable as tax deductions in the 2020 tax year.

 

As a basic example, if you received a $45,000 PPP loan and it gets fully forgiven in 2020 or you reasonably expect it be fully forgiven, then

 

there is no COD income for the loan forgiveness on your Entity tax return,

 

But you LOSE the tax deduction for the expenses paid with the PPP loan, so

 

Net/net, you decrease your 2020 expenses on your tax return by $45K, AND

 

This will result in an increase of your net income by $45K on the 2020 entity tax return

 

PPP Loan Fraud Will Most Likely be in the Billions

 

Further, on the PPP front, it appears that shockingly (umm, well who are we kidding… expectedly) the loan submissions were rife with fraudulent applicants. This interesting article states that the House Select Subcommittee on the Coronavirus Crisis estimates the fraud at over $4 Billion American dollars. Yes with a Capital B. Unfortunately, this comes as no surprise. Here’s a link to the article.

 

https://www.nytimes.com/2020/12/09/business/ppp-fraud-paycheck-protection-program.html?referringSource=articleShare

 

Hopefully you all are enjoying your holiday season so far, despite these trying times.

 

If you get a chance, take a look at my new website:

 

www.thesullivanlaw.com

 

And YouTube Channel:

 

https://www.youtube.com/channel/UCb9o8tVG19Muf1HMOT5kURw