The 2nd round of funding for the PPP resumed on April 27, 2020. Many businesses are receiving word that their applications were accepted and have been receiving the money into their accounts.
Unfortunately, at this time the guidance on the loan forgiveness is lacking and at times contradictory. There have been many changes within the last few days that lead me to believe that the possible loan forgiveness will not be as straight forward as many had hoped. The AICPA has released a list of recommendations to the U.S. Small Business Administration regarding the calculation of payroll costs, FTE (full-time equivalent employees), 8-week covered period and more. Until more guidance is released by the SBA, we will be forced to rely on the current SBA published guidance. The IRS has recently released guidance stating that expenses related to the forgivable loans through the PPP won’t be tax-deductible. The agency cited Section 256 of the tax code, which states that deductions can't be taken if they are tied to a certain class of tax-exempt income. On may 6th the Senate introduced legislation to enable small businesses to deduct their expenses, even if the loan is later forgiven.
Until a bill passes, businesses need to plan to pay taxes on the forgivable portion of their loan.
If you are a business owner who has received the PPP, it is prudent that you stay updated and current on this very fluid situation. If you would like our assistance with managing your PPP, please contact Michelle at email@example.com for more information on how we can help.