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November PPP Update
Dear Valued Williams & Company Client:
In an effort to keep you as informed as possible related to the various COVID related stimulus programs implemented by the Federal Government we want to pass along a recent development, and reminder of an ongoing program.
PPP Loan Forgiveness Update
In a Revenue Ruling released by the IRS on November 18th, the IRS has confirmed that any expenses paid with “forgiven” PPP loan funds, will not be deductible, thus meaning any forgiven loan proceeds will affect taxable income.
The new release, however, also stated that the nondeductible expenses should be reflected in 2020 even if you wait until 2021 to apply for forgiveness. This is very different from previous understanding, which was that the non-deductible expenses would not be reflected until the year that forgiveness is actually granted. So contrary to previous communications, in most cases the non-deductible expenses will need to be reflected on your 2020 tax filing, thus increasing taxable income. If you do not reasonably expect your loan to be fully forgiven you should discuss with your tax advisor.
There is still some commentary that believes Congress could pass further stimulus bills that would provide for the deductibility of expenses paid with the forgiven loan funds, however, under current law and IRS rulings, taxpayers should plan to treat applicable expenses as non-deductible.
A quick reminder concerning the Families First Coronavirus Response Act (FFCRA). This is the program that allows for employers to pay employees whom were unable to attend work because they were directly affected by COVID 19 or were required to care for a family member effected by COVID 19. The act requires employers of over 50 employees to comply with the act and for those with less than 50 employees, it is required unless it places undo hardship upon that employer to comply with the act. Employers who pay qualifying wages will receive a 100% payroll tax credit for those wages as well as be exempt from contributing the employer’s share of social security on those wages. The act does limit the number of hours to be paid per employee under the act, as well as the amount paid per hour. This act currently expires on 12/31/20. If you have further questions, please contact us.
We are here to help
Our team will continue to make every effort possible to stay informed in this constantly evolving area and share pertinent information as we receive it. However, please reach out and let us know how we can help you.