New Relief Package-December 2020
The new stimulus bill: Congress signed it into law and the President will likely sign very soon~
New news from Congress regarding the PPP loan and its tax impact for 2020. As you likely know, the PPP income was considered non-taxable…however, until yesterday, the expenses related to spending the PPP money were not-deductible, thereby making it a net taxable event. Well, the Congress finally got it right and overruled the IRS, by determining that the expenses used to burn down PPP ARE deductible, so we no longer have concern about the PPP money as being “net” taxable.
Even if you (and most of us haven’t yet) applied for forgiveness, the PPP forgiveness (all or in part) can be taken on the 2020 tax return for your business as “in substance” forgiveness. There’s certain tax rules that impact one’s capital account/basis if you’re an S Corp that’s got a loss this year (even with the PPP money), so if you’re an S Corp (or an LLC taxed as an S Corporation) and you’ll have a loss this year, please do reach out, as there’s some potentially fancy footwork that needs to be done prior to end of the year.
Also, if you received the EIDL grant before PPP money came out (that was the $1k-$10K, depending upon # of employees), that is now considered, like the PPP money, non-taxable income and no longer debt on the books. But wait, there’s more . . . this EIDL grant no longer goes against the forgiveness of the PPP money. Previously, the deal was that the EIDL grant money was not only a loan BUT it would reduce forgiveness amounts. No more though! Its not taxable income, doesn’t need to be repaid, and didn’t impact PPP forgiveness.
Also, a few other tidbits. In 2021 and 2022, meals expense is 100% deductible. This past year, all meals and entertainment were limited to 50%.
You may have also heard about a new PPP program that could bring additional PPP money in to your company. The scoop is that, if your business has under 300 employees, you compare any quarter in 2020 to the same quarter in 2019, and if the current year’s quarter is 75% or less (that’s a drop of 25% or more) than the prior year’s quarter (must be same quarter comparison), you can qualify. There’s a big caveat though. You have to be able to claim, under penalty of perjury, that there’s a necessity requirement. That means you have to be able to state that if you don’t get this next slug of money, that the business will have considerable issues in continuing as a going concern.