COVID-19 RESOURCES

PPP: The Never Ending Story v.11.2020

The IRS sent out more guidance last week on how we should treat expenses paid for with PPP Loan Proceeds. The unknown factor was whether loan forgiveness would affect one's deductible expenses in 2020 when the money was spent or if it would have an effect in 2021 (if you waited to have the loan forgiven until 2021). Their new guidance made it clear that if there is a "Reasonable Expectation of Reimbursement", i.e., loan forgiveness, the expenses should NOT be deducted in the year in which they occurred (which is 2020).

This made the IRS position clear: unless Congress changes the rules (again), the IRS wants taxable income increased in 2020 even if loans aren't forgiven until 2021. This also means there isn't any reason to delay loan forgiveness requests any further. Read below for some tips on that process.

Time to Request Loan Forgiveness

We suggest you start the loan forgiveness application process with your bank now. If you do it now, we'll hopefully know if they do not forgive part of the loan before we file your 2020 tax return.

To help you in this process, we have links here under PPP and EIDL Loan/Grant Programs dropdown.

STEP ONE: Look over the "Which Loan Forgiveness Application Do I Use?!?" link. It's a simple chart of the 3 different loan forgiveness applications available and is a good place to start.
STEP TWO: Determine if you qualify for any Exceptions to Workforce Reduction Rules.
STEP THREE: Fill out the correct Loan Forgiveness Application and submit to your Bank.

If you do need help with this, we are charging $150/hour for help completing applications and/or calculating partial loan forgiveness. Hopefully the above information--along with the simpler versions of the applications--will allow most of you to complete this directly with your banks, but please let us know if you'd like our help.

Did you also get an EIDL Advance?

Please note: If you received an Advance from the SBA's EIDL program (it was supposed to be $1000 per employee with a cap of $10,000), you DO have to report that on the PPP loan forgiveness application. Your PPP loan forgiveness is supposed to be decreased by any EIDL advance received. So just be aware that you need to report the amount received and that this should result in decreased loan forgiveness from the bank.

We hope you have a safe and socially distanced Thanksgiving. Seeing the family via zoom is much better than the potential worst-case scenario this year. My only positive/negative spin is that we won't have to fight over the last of the stuffing and pie--there are a lot of Foxes in the family!

-- Mark, Alyssa and The Fox Tax Quaranteam

NEWSLETTER ARCHIVE