PPP loan forgiveness taxable?

[kathyc2]

I admit I haven't been following this closely. It appears that if the "loan" is forgiven, it is not taxable income. Is the payroll expense that is paid with the proceeds still deductible as a business expense?

[TaxGuyBill]

It is not taxable income, but that last I checked, there had not been any guidance on whether the paid expenses are deductible.

[rbynaker]

It is not taxable income, but that last I checked, there had not been any guidance on whether the paid expenses are deductible.

"Here, have some money. We'll tell you later what the costs and consequences are going to be. We're from the government and we're here to help."

[Burke]

I don't see why not. You can treat it as a gift.......

[BOB W]

Great question Kathyc2, Now that most of my business clients have their PPP in the bank, how to handle going forward has been on my mind. All my businesses are tracking the use of loan proceeds and I have applied expenses to that loan account as of now. This is primarily to make it easier when accountability date comes due.

Accountability...…. When does it start? 2/15/20. Or the date the loan proceeds are received? When does it end? ????????

[BOB W]

If the loan is a grant, how is basis handled? If we get to deduct PPP expenses, there could possibly be left over $$ in the account. Would withdrawal of those funds just be taken without basis adjustment in an S corp?

[TaxGuyBill]

Accountability...…. When does it start? 2/15/20. Or the date the loan proceeds are received? When does it end? ????????

The "accountability" for expenses starts on the loan date.



the term ‘‘covered period’’ means the 8-week period beginning on the date of the origination of a covered loan



(b) FORGIVENESS.—An eligible recipient shall be eligible for forgiveness of indebtedness on a covered loan in an amount equal to the sum of the following costs incurred and payments made during the covered period:
(1) Payroll costs.
(2) Any payment of interest on any covered mortgage obligation (which shall not include any prepayment of or payment of principal on a covered mortgage obligation).
(3) Any payment on any covered rent obligation.
(4) Any covered utility payment.

[BOB W]

Loan date and funds received can be weeks apart??????

[kathyc2]

So, what is to stop someone from paying employee bonuses to use up the full amount? Say someone got a loan for 200K. During the 8 weeks, the covered expenses will amount to 170K. In the last week can they not just give employees bonuses so they have expenses to use up the entire amount?

[BOB W]

April 26th is when SBA will publish all of it requirements for PPP accountability in order to turn the loan into a grant....Bonus checks won't work...

[JON]

They are redoing the information that has to be supplied to have it not taxable...

[BOB W]

I hope so because it now is such a mess..... Not to mention businesses that get the loan and are still not allowed to open..... Their 8 week window is a risk....

[JT2307]

As my clients are receiving the PPP funds I start wondering - sole proprietors receive money for their net profit - and this can be forgiven? - sounds like "free" money - maybe I should have applied but didn't because my employees are only seasonal part time and they are done for the year. Just didn't feel quite right. Maybe I was wrong.. Yes I can justify for the non-essential businesses but not the essential - unless losing money I guess??
Just my thoughts.

[Lion]

I'd be happy to get enough money to cover all the webinars I'm taking every time Congress votes again! I heard that forgiveness regulations will be announce in May.