Concern Regarding Forgiveness of PPP Loans
Many people have applied for the PPP loans. There is now a lot of concern at the present time regarding the forgiveness of the PPP loans. Much more guidance is needed soon in order to comply with the expenses that are covered for forgiveness. A lot of the guidance at this time from the SBA seems to conflict with the intent of congress when the law known as the CARES ACT was passed. Here are a few interesting items from the SBA guidance at this time:
- Utilities included in covered costs include electricity, gas, water, transportation, telephone and internet access.
- An increase in employees’ pay in the form of a short term pay increase, hazard pay or bonus is not prevented.
- If a business is not open due to the pandemic, employees will need to be paid even if they are not able to work to ensure maximum forgiveness of the loan.
- Prepayments of mortgage interest is not a forgivable expense. Further guidance is needed for other expenses.
The CARES ACT specifically states that any part of the PPP loan that is forgiven will NOT be included in taxable income. The IRS recently issued Notice 2020-32 to explain that expenses paid with a PPP loan that is forgiven may NOT be deducted for tax purposes. This is definitely contrary to the intent of congress. In fact, bills have been introduced in congress to change this and make the payments deductible just like any other expenses of the business.
So, currently, the loan forgiveness will not be included in taxable income, but the expenses paid with the loan forgiveness will not be deductible either. Congress is working on making the expenses paid deductible. If that happens, the loan forgiveness would not be taxable income, but the expenses paid would be deductible. Let’s hope that happens.
So, what's next?
If you received SBA PPP loans, you need to be tracking what you're paying for with this loan money.
You may be interested to know that RBSK can further assist in tracking your spending - right now. Our team can help you track and document all spending, to ensure that you'll be ready to apply for forgiveness as guidance becomes available.
Contact your trusted advisor at RBSK Partners PC to recieve help at 800-676-7567
By electing to use RBSK Partners PC in an advisory capacity, we do not guarantee loan forgiveness eligibility nor acceptance of your application. Eligibility results vary due to specific circumstances. Please contact us if you have any further questions.
As indicated above, more guidance is needed with regard to the PPP loan forgiveness. The information above is guidance given at the present time that could change. As more guidance is given, we will update this information in future newsletters and within our COVID-19 Guidance Center.
For more information visit our COVID-19 Guidance Center.
Tips of where to get your information about the virus
Centers for Disease Control and Prevention CDC.gov
Indiana State Department of Health News ISDH.in.gov
World Health Organization WHO.int
Where to find local updates about the virus
Decatur County Health Department Facebook Page
Bartholomew County Health Department Facebook Page
Ripley County Health Department Facebook Page
Franklin County Health Department Facebook Page
North Vernon Plain Dealer & Sun Homepage
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