NEW PPP Loans Are Here! (1/20/21)

Many of the banks are now accepting PPP2 loan applications.

If you need any help…let me know as soon as possible… as I’m working on several applications already.

What I know: 1. You do not need to submit for loan forgiveness of the initial PPP loan before requesting the 2nd draw. 2. You do have to show a drop in revenue of at least 25% for a quarter in 2020 compared to the same quarter in 2019. 3. You do need to have established that the total of your first PPP loan was utilized and for qualified expenditures.

The rules for forgiveness and qualified expenses have changed…and should be clearer and easier to determine.

California says no deduction for expenses paid with forgiven PPP funds (12-23-20)

In anticipation of the new federal stimulus package, we want to let you know that California law specifically requires PPP loan forgiveness to reduce deductions. California does not conform to this federal law, which is amended as part of the stimulus package. Taxpayers will still be required to reduce their deductions on the California return because California enacted AB 1577 (Ch. 20-39), which specifically prohibits taxpayers from claiming any deductions or credits for expenses that are paid with forgiven PPP loan amounts.

So when tax planning, reduce business expenses by the amount of the PPP loan forgiveness on the California return.

IRS releases PPP deduction guidance (11-18-20)

In newly released formal guidance, the IRS has confirmed that taxpayers with a reasonable expectation of PPP loan forgiveness may not deduct expenses paid with those funds, even if the forgiveness has not been granted prior to the end of the taxable year. (Rev. Rul. 2020-27) In the guidance released today, the IRS states that because taxpayers calculate their forgiveness based on eligible expenses paid with PPP funds, the forgiveness of the loan amounts used for those expenses is reasonably expected to occur, and under IRC §265 taking the deductions would be inappropriate.

The IRS supplemented this guidance with additional guidance that states taxpayers who do not apply for forgiveness, or whose forgiveness requests are reduced or denied, may take deductions for expenses paid with the amounts that are not forgiven. (Rev. Proc. 2020-51) Source: Spidell

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