Please Look the PPP Gift Horse in the Mouth
For those of you fortunate enough to receive a loan under the Payroll Protection Program (PPP), here are some vital points that need your close attention. Because the act was written and passed so quickly, IRS guidance has dribbled out in small doses.
Here’s what was released recently, and information may continue to change, so stay tuned.
Any of your business expenses that qualify to be forgiven from your loan amount cannot also be deducted on your 2020 taxes. Expenses such as mortgage interest, rent and utilities, and payroll expenses are not deductible on your 2020 taxes in the amount they are forgiven by your PPP loan.
Self-employment income reported for 2019 also comes into play. If your PPP loan application used Line 31 on Schedule C of your 2019 tax return to define your income, this amount determines how much of your loan can be forgiven. For example: if your 2019 Schedule C line 31 reported that you earned $50,000, the income allowed for PPP loan forgiveness will be capped at $7,692.31 ($50,000, divided by 52, then multiplied by 8.) This amount would be submitted to your lender, with any eligible expenses for which you used the PPP loan money, when it comes time to apply for loan forgiveness.
Which brings us to perhaps the most important point: You must apply for loan forgiveness—it is not automatic. As it now stands, you will have to submit a request to the lender servicing your loan to specifically ask for loan forgiveness. You’ll need to include documents that verify that you used PPP funds to pay eligible mortgage, lease and utilities.
Updates from your lender, the IRS, or SBA are all trusted sources to follow as details unfold from the federal government. We will also send you information as it becomes available.
As always, Gwen and Sibyl are available to talk with you. Book an appointment online by selecting the blue “Book a Meeting” button. We are both going “full steam ahead” right now to ensure you have the guidance and support you need in these uncertain times.
Wishing you and yours safety and health,
Gwen & Sibyl