There is currently a lot of uncertainty around the forgiveness of the PPP Loan. Current laws make it that forgiveness of the loan is not taxable income, but expenses that the funds were used for cannot be deducted in arriving at taxable income. Therefore, it is the equivalent of being taxed on your PPP Loan proceeds. There is talk of the possibility of congress passing a law that will allow you to deduct the expenses while still leaving the loan forgiveness as non-taxable (which would seem to be the original intent of the PPP Loan). This has not been passed yet, and we do not know when it will be voted on - if it ever will be voted on.
There is also talk of automatic forgiveness for loans under $150,000. If this passes then the process and paper work needed for loan forgiveness becomes irrelevant. With these two factors being up in the air, we are recommending our clients wait for further clarification until applying for forgiveness.
The period for which you have to spend your PPP Loan proceeds on qualifying expenses has been extended to 24 weeks. After that 24 week period is up, you have 10 months to apply for forgiveness before payments on the loan will have to be made. That means there is no rush in applying for forgiveness. There is plenty of time to wait and see if the forgiveness process will be easier for you, and to see what the taxability of the forgiveness will turnout to be.
Additionally, if there was ever a year to do tax planning THIS ONE IS IT! Please give us a call to set up a tax planning appointment. We can go over where you are at so far this year, project where we think you will be at the end of the year, and most importantly we will go over your options for loan forgiveness and help you decide what will be the best course of action for you and your business.