One reason is Congress is expected to pass possible revisions that would simplify the process (and make tax planning easier). In the meantime, the Small Business Administration and the U.S. Treasury Department just published interim final rules on PPP loan forgiveness.
In the state of Minnesota, more than 98,000 loans were granted to small businesses worth $10.2 billion to help them balance their finances during the economic contraction for the COVID-19 pandemic, and keep employees on the payroll. In South Dakota 22,500 business recipients received $1.66 billion in funding.
Under the loan, the full amount can be forgiven if 60% of the loan covered payroll costs. According to the FAQ provided by the SBA and Treasury department, expenses for group health care coverage do count as payroll costs. Even if that falls short, your business can apply for partial forgiveness.
Read on to get the full update to guide your next steps when it comes to applying for PPP loan forgiveness.
The big question here is whether the costs covered by the PPP loan would be tax deductible. So far, it’s clear that debt cancellation won’t count toward taxable income, but many business owners worry they won’t be able to write off the PPP-covered expenses, like rent, mortgage interest and payroll, when it comes time to file taxes. Minus the deductible, that could result in a hefty tax bill, which is the last thing anyone wants in a challenging economic climate.
Clearer answers on PPP loan forgiveness are expected in the coming weeks. For that reason, your lender and CPA may be advising you not to rush to apply for PPP loan forgiveness. Many are hopeful that a simplified forgiveness process could come with the next COVID-19 relief bill. In the meantime, make sure your records are in good order, and prepare your paperwork so you can file quickly. As always it’s smart to consult with your tax advisor or tax professional on any tax implications to consider.
What happens if your request for PPP loan forgiveness gets denied? You can take the decision to the SBA’s Office of Hearing and Appeals. But just a heads up: Unlike the IRS appeals process, you’ll need to hire legal counsel. If you’re working with a CPA, they can tell you more about how to plan and what to expect. You can find more details about the PPP loan appeals process here.
Not sure what to do next? You can always reach out to your helpful lender at Minnwest Bank. We’re there to be your guide for any financing options. We’re not only an SBA Preferred Lender, we live and work right in your community, so you’ll get the guidance you need for your next steps. To get started, talk to one of our commercial bankers.