Our compliance team is trained and ready to complete your financial institution's specific requirements surrounding the PPP Loan Forgiveness Application. We'll optimize and complete the ever evolving application while you continue to focus on business operations. Click here to engage us to complete your PPP Loan Forgiveness Application.
Increase in Taxable Income for Recipients of PPP Loans who Receive Forgiveness
Within the first month of the CARES Act passage the IRS issued Notice 2020-32. If you have been participating in our Client Zoom Events (click here to view the recordings), you may recall some intentional discussions around this subject. This Notice clearly sets forth the IRS position that if a PPP Loan is forgiven, then the expenses associated with said forgiveness are not going to be deductible for income tax purposes. PPP Loan forgiveness has been deemed a class of exempt income, by statute, as the CARES Act specifically states that loan forgiveness shall not constitute taxable income. This non-deductible expense issue stems from the overarching tax principals around two concepts: 1) Expenses associated with producing tax-exempt incomes and 2) Tax-exempt income received by a taxpayer that is earmarked for a specific purpose that would typically result in ordinary and necessary business expenses. Such otherwise deductible expenses attributed to the tax-exempt income are no longer deductible in both of these situations. This effectively results in taxable income up to the amount of loan forgiveness, except for potential strategies surrounding self-employment reporting. Although there is some controversy around this non-deductibility interpretation, Congress has not taken action. We are advising our clients to consider this significant increase in taxable income when making estimates and planning for their 2020 income tax. Please reach out to your CPA for additional discussions and to explore advanced income tax planning in light of this potential burden.
PPP Loan Forgiveness Applications Processing
Banks are starting to accept PPP Loan forgiveness applications. This process can be quite simple or incredibly complex depending upon the facts and circumstances. Regardless, the document retention and substantiation requirements alone require a heightened level of intentionality. If you would like Blankenship to help you process your PPP Loan forgiveness application you can reach out to your CPA to get our team moving, or for your convenience just click here and we will reach out to you to discuss your unique situation and find the fastest and easiest route to forgiveness. We have developed a plan that maximizes forgiveness while mitigating the non-deductibility issues, as previously discussed, that our consulting team can potentially apply to your specific forgiveness application.
PPP Loan Forgiveness Application
On June 16th, the SBA released an updated PPP Loan Forgiveness Application following Congress passing the PPP Flexibility Act in early June. This new form addressed many open questions, created an EZ Form option, and overall took many pro borrower positions. We updated our PPP Loan Forgiveness Blueprint, answered the related new questions, and then talked through this on a Zoom event recorded June 25. You can see our three previous Relief Perspective event recordings here.