PPP Loan Rules

[69 1/2]

I hear stories of people using PPP Loan proceeds for toys. While I have no desire for more toys I would like to use that money to pay off a note I have with the previous owner. I have a simple note/debt to the previous stock holder of a C-Corp. I make payments to him with after income tax income. Is this PPP taxable? Maybe only if I take it out of the Corp?

I‘m posing this question to my accountant this week but wondering if anyone has any experience with this issue.

 

[ChumpChange]

PPP proceeds will be taxed as income if forgiven.

 

[Englewood]

When this PPP money runs out, things are gonna change quickly...PPP loan fraud is gonna be a huge issue...

Guys are getting 2-3m bucks and never even had a slowdown. Use the PPP funds for payroll go buy toys with payroll savings...It's happening all over.

 

[J DUNN]

I have read previously that PPP forgiven funds will NOT be seen as a taxable event by Feds but will be by CA Govt. Not sure where business is for OP. In line with what Parker Magic is saying, use the funds for forgivable purposes then use the money you "save" to pull it out of company, likely taxed as income to you, and then make the payment to the previous owner.

 

[Done-it-again]

I wonder if the people complaining about PPP loan fraud own their own business or not, if not then you don't really know. It didn't say you needed to be slow at the time of the loan to get one, so yes some kept working like normal. Others can have their slow period can come months later and the money can come in handy. There are always bad apples, but not everyone who took PPP are buying shit like crazy....The fraud is much larger with unemployment

 

[WATERDOG]

There was another post about this where somebody posted the rules.

 

[Xtrmwakeboarder]

I'm a simple bean counter, and this is constantly changing, but see the link. As Chump said, if forgiven, it's essentially taxable.

https://www.irs.gov/pub/irs-drop/n-20-32.pdf

 

[LargeOrangeFont]

I wonder if the people complaining about PPP loan fraud own their own business or not, if not then you don't really know. It didn't say you needed to be slow at the time of the loan to get one, so yes some kept working like normal. Others can have their slow period can come months later and the money can come in handy. There are always bad apples, but not everyone who took PPP are buying shit like crazy....The fraud is much larger with unemployment

Agreed. Everyone jumped all over me when I said this is the .Gov's fault, but nothing in the PPP talked about "needing" the money. And the .Gov did not put in a way to define "need" for PPP, so this is what we got.

Any smart person that runs a business could take the money and "save" it for a rainy day that might be coming. That is not fraud.

 

[LargeOrangeFont]

When this PPP money runs out, things are gonna change quickly...PPP loan fraud is gonna be a huge issue...

Guys are getting 2-3m bucks and never even had a slowdown. Use the PPP funds for payroll go buy toys with payroll savings...It's happening all over.

Unless it is blatant fraud, I don't think anyone is going to really care. They are already going to tax you for the income.

 

[Englewood]

Agreed. Everyone jumped all over me when I said this is the .GOV's fault, but nothing in the PPP talked about "needing" the money. And the .Gov did not put in a way to define "need" for PPP, so this is what we got.

Any smart person that runs a business could take the money and "save" it for a rainy day that might be coming. That is not fraud.

Agreed. I own a business but didn't take a PPP loan. The problem was that the qualification process had no investigation into the needs of the funds. We are in unprecedented times so I understand it had to be done quickly.

 

[LargeOrangeFont]

Agreed. I own a business but didn't take a PPP loan. The problem was that the qualification process had no investigation into the needs of the funds. We are in unprecedented times so I understand it had to be done quickly.

Agreed. Fraud and lack of investigation is the consequence of acting so quickly. In the end, the net-net is probably better that the funds helped more people stay employed.

 

[SLT Kota]

They made it very clear that they were looking for speed over accuracy, that is why so many dead people got stimulus checks.

Nobody knew if their business was going to get hurt later down the road, many still don't know what will happen long term. I see no problem with any private company applying for it.

 

[Racer56]

Have the final guidelines been published yet? The year is coming to an end and it sure would be nice to know how to close out my company books for the fiscal year.

 

[DLC]

@69 1/2
To the best of my knowledge they haven’t released any info on how PPP will be addressed on taxes! I believe this has been delayed on purpose To expose any fraud.

follow the guidelines set in the loan and wait until next year to decide. All the cards will be placed on the table and you’ll know in the next 4 months what’s going to happen. As long as your able to use PPP for payroll And rent you’ll be good and the loan will most likely forgiven, then you can do what’s best for your business..

 

[ChumpChange]

Have the final guidelines been published yet? The year is coming to an end and it sure would be nice to know how to close out my company books for the fiscal year.

No because they have had proposed changes in new stimulus bills such as blanket forgiveness for loans less than $150,000.

 

[c_land]

Have the final guidelines been published yet? The year is coming to an end and it sure would be nice to know how to close out my company books for the fiscal year.

We have been working on the forgiveness paperwork with both ADP and our Bank. I would check with the bank.

 

[Racer56]

We have been working on the forgiveness paperwork with both ADP and our Bank. I would check with the bank.

ADP, US Bank and our accountant all told me today that there is no determination yet. If it remains a loan and the government doesn't make a decision until next year, it will be a issue to deal with at the end of 2021.

 

[DLC]

They need to make a decision because it will impact your taxes for 2020

 

[McKay]

They need to make a decision because it will impact your taxes for 2020

Not if you just leave it as a liability on your balance sheet. Which every business should do until all the rules of forgiveness come out.

 

[DLC]

Not if you just leave it as a liability on your balance sheet. Which every business should do until all the rules of forgiveness come out.

the rules should be coming out soon before end if the year, all the people that got the extra $600 week unemployment bennies are in for a surprise also! Big brother needs to figure that out as well....

keep in mind PPP was based off 2019 payroll ( basically W-2 employees ) 12 months Then they figure out what 2months Of that payroll was....

 

[Cole Trickle]

PPP Loan Recipients Are Lawyering Up | ThinkAdvisor

Defense lawyers say they are getting calls from PPP loan recipients who have been contacted by investigators, or fear they may face charges.

www.thinkadvisor.com

Intresting article...Sounds like some people might be in for a big surprise. Better have your paperwork in order

 

[McKay]

the rules should be coming out soon before end if the year, all the people that got the extra $600 week unemployment bennies are in for a surprise also! Big brother needs to figure that out as well....

keep in mind PPP was based off 2019 payroll ( basically W-2 employees ) 12 months Then they figure out what 2months Of that payroll was....

It was actually based on an average of 10 weeks of 2019 payroll. Then originally you had 8 weeks once funded to use up the funds but that was extended to 24 weeks.

 

[Angler]

Here is a link to those who took under $50k (I took 45k), very simple form to fill out. Still waiting to see if they change it again before filing.
https://www.journalofaccountancy.co...giveness-simplified-for-loans-50000-less.html

 

[c_land]

Up until yesterday, the rules had been that all expenses that the PPP loan was used to cover would not be tax deductible.

Last night we received notification from our CPA firm that the stimulus bill includes a provision that allows for the deduction of any items paid for with PPP Loan proceeds.

EDIT: We are waiting on the contents of the final bill to proceed. Check with your tax professionals. This change will have significant impact on our tax projections for 2020.

 

[DUNEFLYER]

Could really use an answer on this from our government, hard to close the books for the year with this deduction/non deduction still undecided in the final hours of the year..

Up until yesterday, the rules had been that all expenses that the PPP loan was used to cover would not be tax deductible.

Last night we received notification from our CPA firm that the stimulus bill includes a provision that allows for the deduction of any items paid for with PPP Loan proceeds.

EDIT: We are waiting on the contents of the final bill to proceed. Check with your tax professionals. This change will have significant impact on our tax projections for 2020.

 

[c_land]

Could really use an answer on this from our government, hard to close the books for the year with this deduction/non deduction still undecided in the final hours of the year..

Agreed... it would have been nice to know a month ago before we purchased a bunch of equipment and prepaid expenses to reduce anticipated tax liability.

 

[spark2678]

Yes, watching this closely. This is a huge deal!!

 

[jesco]

Agreed... it would have been nice to know a month ago before we purchased a bunch of equipment and prepaid expenses to reduce anticipated tax liability.

^^^^THIS!!!! ^^^^ I have been weary all year about this loan. Yes, it helped out and put us in a strong position... but they fuck this up its gonna hurt A LOT of SMALL BUSINESS... which right now they clearly give two shits about.

 

[UltraLucky]

Could impact your overhead rates negatively for the next few years as well. This will affect Cost + public works contracts. I have also heard discussions of clawing back portions used on payroll for federally funded public works projects.

 

[RandyH]

Dont ask for foregiveness, take it as a loan at 1% and expense it. Cheap money as I see it.

 

[Javajoe]

Link to look up who received PPP loans...

Search Results - Tracking PPP - ProPublica

As part of the Paycheck Protection Program, the federal government has provided hundreds of billions in financial support to banks to make low-interest loans to companies and nonprofit organizations in response to the economic devastation caused by the coronavirus pandemic. Search more than 11...

projects.propublica.org

 

[ChumpChange]

Dont ask for foregiveness, take it as a loan at 1% and expense it. Cheap money as I see it.

Expense it? Can't expense principle.

 

[RandyH]

Expense it? Can't expense principle.

Maybe i dont understand but if you choose to take it as a 1% loan, and pay it back. All the payroll and rents you paid as you normally do.. would be deductable expenses in 2020. Its a Moot point now if Trump signs the Bill .

 

[ChumpChange]

Maybe i dont understand but if you choose to take it as a 1% loan, and pay it back. All the payroll and rents you paid as you normally do.. would be deductable expenses in 2020. Its a Moot point now if Trump signs the Bill .

And it’s still expenseable with the forgiveness. Why would your expenses disappear? You still expense payroll, you just have PPP income to offset it if forgiven.

The only difference is claiming the PPP as income or not. I’d rather pay 30% tax on $500,000 than pay the whole $500,000 back.

 

[LowRiver2]

I thought all these companies were doing brisk business during the spring/ summer?

 

[LowRiver2]

Is this the powersports dealer?

 

[ChumpChange]

View attachment 954445 View attachment 954446 View attachment 954447 View attachment 954448
I thought all these companies were doing brisk business during the spring/ summer?

And most of these loans were approved within a month of the shut down. Nobody knew what was gonna happen at that point. The first month or so after the shut down, everything was slow. Trust me. Nobody knew what was coming.

 

[LargeOrangeFont]

View attachment 954451
Is this the powersports dealer?

Yes.

 

[LowRiver2]

And most of these loans were approved within a month of the shut down. Nobody knew what was gonna happen at that point. The first month or so after the shut down, everything was slow. Trust me. Nobody knew what was coming.

Fair enough
So for those companies that made money, had 0 financial loss (couple employees out for Covid shouldn’t count), are they expected to pay that loan back in full based on their earnings? (I’m sure many will show a “loss” regardless)

 

[LargeOrangeFont]

And most of these loans were approved within a month of the shut down. Nobody knew what was gonna happen at that point. The first month or so after the shut down, everything was slow. Trust me. Nobody knew what was coming.

Agreed on the timing.

All that does not even matter however. The government didn’t define who could get the money. The government said if you want money, apply for it.

 

[LargeOrangeFont]

Fair enough
So for those companies that made money, had 0 financial loss (couple employees out for Covid shouldn’t count), are they expected to pay that loan back in full based on their earnings? (I’m sure many will show a “loss” regardless)

Doubtful. The .gov will get 1/3 back in taxes and we will move on.

 

[LowRiver2]

All that does not even matter. The government didn’t define who could get the money. The government said if you want money, apply for it.

My issue (more irony), is that I’ve heard so many private small biz owners complain about my earnings/pension as a public employee.
This situation is a govt. hand out that was supposed to be for those that had financial losses due to Covid. We all know the businesses I just posted did the same biz they did in 19’ at least, some made more money. Would be nice if those companies paid back the loan if they didn’t face a true hardship.
Transparency works both ways beteeen public/private professions.

 

[LargeOrangeFont]

My issue (more irony), is that I’ve heard so many private small biz owners complain about my earnings/pension as a public employee.
This situation is a govt. hand out that was supposed to be for those that had financial losses due to Covid. We all know the businesses I just posted did the same biz they did in 19’ at least, some made more money. Would be nice if those companies paid back the loan if they didn’t face a true hardship.
Transparency works both ways beteeen public/private professions.

I agree. But also consider that not every business owner went out and bought a boat, house or Lamborghini. Some of those business used the money as working capital to ensure jobs, and maybe hire more people as business was picked up.

As a business owner, if you offered me a low interest loan for working capital, the answer is always going to be “Yes I need it”. Especially with any financial uncertainty.

At a macro level all these funds were good for the economy as a whole, and injected money into the system.

As usual, the hypocrisy is laughable because the people complaining about businesses getting money they didn’t “need” went out and blew their first round of $600 personal covid money on Can Am parts or other junk because they didn’t “need” the $600, but cashed the check anyway.

 

[Bobby V]

Fair enough
So for those companies that made money, had 0 financial loss (couple employees out for Covid shouldn’t count), are they expected to pay that loan back in full based on their earnings? (I’m sure many will show a “loss” regardless)

Didn't Nordic shut down the shop for a month?

 

[Done-it-again]

And most of these loans were approved within a month of the shut down. Nobody knew what was gonna happen at that point. The first month or so after the shut down, everything was slow. Trust me. Nobody knew what was coming.

I think this is hard for non business owners to comprehend. They just keep collecting a paycheck and if they keep coming their life doesn’t change, so all must be good on top of the totem poll.

 

[LowRiver2]

I agree. But also consider that not every business owner went out and bought a boat, house or Lamborghini. Some of those business used the money as working capital to ensure jobs, and maybe hire more people as business was picked up.

As a business owner, if you offered me a low interest loan for working capital, the answer is always going to be “Yes I need it”.

At a macro level all these funds were good for the economy as a whole.

As usual the hypocrisy is laughable because the people complaining about businesses getting money they didn’t “need” went out and blew their first round of $600 persona covid money on Can Am parts or other junk because they didn’t “need” the $600, but cashed the check anyway.

True
But there are companies that blew that cash on personal crap. I ran my local zip code as I know all the construction players in my hood.
The small guys jumped on the loans and I know for a fact they did not slow down ever during the last 10 months.

I had to wait for 4 days for one load of concrete last month, and that was with Robertson’s, one fo the biggest plants in my area.

Time will tell what happens

 

[LowRiver2]

I think this is hard for non business owners to comprehend. They just keep collecting a paycheck and if they keep coming their life doesn’t change, so all must be good on top of the totem poll.

My ex’s family has had a road milling company for the last 35 years they started from scratch.
I know first hand how small business works and how corners are cut, personal toys get “acquired” through a business.

Call me the hybrid, I know both sides of it.
I’d just like to see those that slight us “paycheck” guys be fair and only take what they need like the hours I work.

I’m also the first to know that will never happen.

 

[LowRiver2]

Didn't Nordic shut down the shop for a month?

Could of
Not saying they didn’t need the loan.
Profit margin at the end of year will determine it.

 

[McKay]

Fair enough
So for those companies that made money, had 0 financial loss (couple employees out for Covid shouldn’t count), are they expected to pay that loan back in full based on their earnings? (I’m sure many will show a “loss” regardless)

Earnings (Revenue) does not come into account for PPP round 1. PPP round 2 it does.

 

[Havasu blue label]

Look a little deeper who took out ppp money in az Havasu and calif. ok there not ballers they just use the government credit card