Well, if you were wise, you probably saw this coming.
Turns out … if you received a PPP loan, that the expenses you pay from the proceeds of this (forgivable) loan … are not deductible for Suffolk County businesses.
The IRS just released new guidance to this end (which is being protested by CPA associations). This reduces the value of this “loan”, depending on your tax rate.
And it’s a good lesson for all of us: Congress can do whatever it likes. And it doesn’t need to tell you in a timely fashion. It can come in at the 11th hour and change everything.
Welcome to my world.
That said, we can do certain things on your Suffolk County company’s taxes (with your cooperation) to reduce the impact of this new IRS guidance.
But I highly (HIGHLY) recommend that you don’t walk this road alone. This is most definitely the season during which there is a clear separation between those who have good advice in their corner … and those who don’t.
Now, there is something else you need to understand:
The IRS and the SBA have NOT released clear guidance about how to ensure that every part of this PPP loan is forgivable.
Yes, we know the basics (that I’ve already covered):
– Keep/restore at least 75% of pre-February 15, 2020 payroll by June 30, 2020.
– Use all the funds within 8 weeks of PPP disbursement.
– Submit the proper paperwork to your bank to that end.
Well, here’s the problem — EXACTLY what kind of proof will be required?
- What happens if an owner takes a bigger wage to reach that 75%?
- Will any of us have to PROVE that we were impacted by Covid-19?
- If so, HOW will we prove it to their satisfaction?
We don’t have good answers to these questions yet, at least from official channels.
But we are working on it, and paying attention to ALL OF THIS … so you don’t have to.
And we will keep you posted.
We’re crossing our fingers that Congress, the IRS, or the SBA gets smart about the taxability issue I opened this strategy note with…
But in the meantime, let us help you do this right, as it happens.
You know where to find us.
Edwin Casanova CPA PC
I’m grateful for our chance to serve you and your business — and we are dedicated to its success, in every season.
Feel free to forward this article to a business associate or client you know who could benefit from our assistance. While these particular articles usually relate to business strategy, as you know, we specialize in tax preparation and planning for families and business owners.