There is a lot of changes this week related to taxes and PPP loans.
There is another round of PPP loans available for those who qualify. Here are some of the key components of the new law: no more than 300 employees, you have between 8 to 24 weeks to use the funds, and you must show at least a 25% drop in revenue in at least one quarter in 2020 compared to the same quarter in 2019. Also, payroll cost must still be 60 percent of your loan amount but in addition to rent, mortgage interest and utilities, you can now use workers protection and facility modification expenditures, property damage cost, and operating cost such as software and cloud services and accounting needs. Hotels, restaurants, and other business with a NAICS code of 72 will receive a higher percentage, 501c6 organizations can now pursue PPP Loans.
There are new guidelines for seeking PPP loan forgiveness. Everyone that received PPP Loans must apply for forgiveness but those receiving less than $150,000 will be able to use a more streamlined process.
PPP loans will not be taxable income nor will expenses have to be reduced by the amount of the loan. EIDL Grants will not be taxable income. For those who like to take your clients to eat, picking up restaurant check for clients will again be fully deductible. More credits will be available for employee retention.
We are awaiting more guidance. Please watch our website daily for updates.
Update as of 11/2020
While all the chatter is about the stimulus payments and the loan programs available for the small business owner there were also many tax provisions that were included in the CARES Act:
While the distribution escapes the 10% penalty, it doesn’t escape the income tax. The Act, however, allows the taxpayer to spread the income over a 3-year period beginning with 2020. The taxpayer also has the choice to avoid any income recognition by repaying the distribution to the retirement plan within three years of receiving it.
This notice also provides a waiver of additions to tax for failure to make a deposit of taxes for certain employers subject to a full or partial closure order due to the coronavirus disease 2019 (COVID-19) or experiencing a statutorily specified decline in business under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).
This notice applies to deposits of Employment Taxes (including withheld income taxes, taxes under the Federal Insurance Contributions Act and taxes under the Railroad Retirement Act) reduced in anticipation of the credits with respect to qualified sick leave wages and qualified family leave wages paid with respect to the period beginning April 1, 2020, and ending December 31, 2020.
This notice applies with respect to deposits of Employment Taxes reduced in anticipation of the credits with respect to qualified wages paid with respect to the period beginning on March 13, 2020 and ending December 31, 2020.This relief ensures that such employers may pay qualified sick leave wages and qualified family leave wages required by the Families First Act or qualified wages under the CARES Act using Employment Taxes that would otherwise be required to be deposited without incurring a failure to deposit penalty.