The PPP Revisited

 In Tax

Happy New Year!

The President signed a new law that will affect businesses who received Payroll Protection Program (PPP) funds. Here is the good news:

  • The PPP funds will be tax-free.  Just as a recap, Congress did not intended for the PPP funds to be taxable. The IRS interpreted that based upon how the law was passed, it was taxable for many, by not allowing the deductibility of expenses related to PPP funds.  Sec. 276 of the new law, which passed on 12/27/2020, clarifies that the PPP Funds WILL NOT BE TAXABLE.
  • EIDL Payroll Advances – If you received an EIDL payroll advance, which was $1,000 per employee up to a maximum of $10,000, then these funds will also be tax-free per Sec 278 of the new law.
  • Loan Forgiveness Process.  Per Sec 307 of the new law, the SBA will design a new and simpler loan forgiveness application for PPP loans of under $150,000.  The SBA will issue this new form by 1/24/2021.  There is still plenty of time to file for loan forgiveness, and this new form is coming out right in the beginning of tax season. I will release a short video in February, once I have had a chance to review the new form, and I will be able to assist clients with the loan forgiveness application after the 4/15/2021 tax filing deadline.
  • More PPP Funds Available – Per Sec 311 new PPP Funds will be available for Small Businesses that can demonstrate that they have had a decline in revenue of at least 25% in 2020 when compared to the same quarter in 2019. These funds are available on a first come first serve basis until 3/31/21.  If you believe that you may qualify, contact the bank where you received your initial PPP loan for an application.
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