IRS Efforts to Destroy Tax Deductions for PPP-paid Expenses

When lawmakers originally passed the Paycheck Protection Program (PPP), they thought that under its provisions:

  • You did not pay taxes on the forgiveness amount, and
  • You could deduct the expenses you paid with the PPP money

In late April, the IRS issued Notice 2020-32, which asserts that PPP loan recipients may not deduct business expenses paid using the PPP monies that gave rise to forgiveness (defined payroll, rent, utilities, and interest).

In a May 5, 2020, letter to Secretary of the Treasury Steve Mnuchin, Senator Chuck Grassley (chair of the Committee on Finance, Senator Ron Wyden (ranking member on the Committee on Finance), and Congressman Richard E. Neal (chair of the Committee on Ways and Means) jointly stated that the IRS got this wrong and that the intent of the CARES Act was for the PPP to be a tax-free grant.

The IRS was unmoved by the lawmakers’ letter. Their position … Read More

Last Minute Year-End Retirement Deductions for Small Business Owners

You still have time before December 31 to take steps to help you fund your retirement. Here are four strategies that might help.

Establish Your 2020 Retirement Plan

Do you have your employer’s retirement plan in place? If not, and you have some cash on hand, get that retirement plan in place now so you can obtain a tax deduction for 2020. For most defined contribution plans, you (the owner-employee) are both the employee and the employer, whether you operate as a corporation or a proprietorship. That is a good thing because you can make both the employer and the employee contributions, allowing you to put a good chunk of money away.

Your plan document defines when you can make employee and employer contributions that will result in 2020 tax deductions. Make sure you know exactly when to make those deductions.

Claim the new, improved retirement plan start-up tax credit of Read More

Good News if Your PPP Loan is for $50,000 or Less

You are likely approaching the time when you will need to apply for Paycheck Protection Program (PPP) loan forgiveness. Here is some good news if your PPP loan:

  • Considered your employees
  • Is for $50,000 or less

If you meet those conditions, your loan forgiveness amount may have increased by 100 percent even though you reduced pay or headcount

Before the $50,0000-or-less rule was instituted, you had to suffer a reduction in loan forgiveness or meet one of many exceptions that allowed you to cut annual salaries or hourly wages by more than 25 percent and/or reduce the number of employees or average hours paid.

Now, with a PPP loan of $50,000 or less, you do not have to consider the myriad of rules about employees. Regardless of what you did with your employees, you qualify for full forgiveness if:

  • Your PPP loan is $50,000 or less
  • You spent the PPP money
Read More