Small Biz Support 2020

[Crusty]

^^...and to simplify even more...

Forgiven amounts are not included in gross income and the associated qualifying expenditures are not deductible.

As I would expect.

[GoldMember]

^^ Correct. I meant to point that out (not included in gross income) in my post but forgot. Well, actually I did say it but maybe not clearly.

An example; Your employer sends you on a per diem paid trip for training. The per diem expense isn't counted as part of your income for tax purposes. You gather all the receipts for hotel and meals and submit them as business related expenses on your taxes.

[Flyoverland Captive]

^^^ That's what I thought too; I even set Qbks accounts to track it outside of income. What threw me is the whole "grant" language; grants are traditionally keyed in Qbks as income.

Still a lot of crap to be sorted out.

[NewYorkDirtBag]

just think of the forgiven portion of the loan as municipal bond interest. Its income, its just not taxable. I will be interested to see if some of the states who really need the money decide to make it taxable on the state level.

[GoldMember]

^^^ That's what I thought too; I even set Qbks accounts to track it outside of income. What threw me is the whole "grant" language; grants are traditionally keyed in Qbks as income.

Still a lot of crap to be sorted out.

The Grant language isn't in the IRS document. I don't think it ever was intended to be in the CARES act, either (never read that document). It's loan forgiveness which isn't a grant, specifically.

[Flyoverland Captive]

Just got this from my CPAs:

On April 30th the IRS issued in Notice 2020-32 that stated expenses paid with a forgiven PPP loan are not deductible. Internal Revenue Code Section 265 holds that expenses related to tax exempt income are not deductible. This is the Code Section that prohibits you from deducting officer life insurance premiums on your income tax return: when the life insurance is received it is not taxable income, therefore, when the premiums are paid you cannot deduct the premiums. The IRS is applying the same logic to the PPP loans: paying payroll caused part of the loan to become tax exempt income.
Not deducting the expense gets us to about the same point as paying tax on the forgiven loan. If Congress intended to give the benefit of a tax deduction for expenses paid with a forgiven PPP loan future legislation will be required.
The PPP Loan program is continually evolving and new guidance is coming out every week. Please let us know if you have any questions.

[GoldMember]

Yes, that notice is what I was working from, too. Our CPA is working with me on it. Here's our situation:

• Estimated Gross Income - $2,500,000 (just a number to work with at this point)
• PPP Loan Amount - $226,800
• Estimated 8 week payroll expense - $185,000
• Estimated eligible overhead expense - $5,000
• Remaining loan balance - $36,800

With that, my question is how we account for the forgiveness, assuming $190,000 forgiveness of debt. As I read it, we don’t count the forgiveness as gross income, therefore doesn’t become taxable even though it’s essentially a 100% grant toward the forgivable expenses. Conversely, the expenses we’re being forgiven cannot be charged against our declared revenue for deductibility. Is that the (very) short version of this? With that, the eight week period really is a sequestered event?

Her response is that we first and foremost have to be sure to hit 75% of the total loan amount HAS to go to payroll expenses. I wasn't clear on this as I thought that of the request for forgiveness, 75% of that had to be payroll. She indicated that if we overshot the payroll amount initially, how did we get approved for the larger number? Likely some prevailing wage work mixed in with the original 2.5 months calculation. We may need to give some people raises during this period to qualify but I'm again trying to clarify this requirement.

Regarding the deductibility of the expenses, they are not deductible if there forgiven. For tax purposes, no revenue or expenses for those funds. They should just flush out. The advantage is, again, you also have your labor costs built into your pricing so you're being reimbursed, with mark-up, by your customers on top of the loan forgiveness. What the customer pays you is, of course, revenue and is taxable.

[Flyoverland Captive]

Thanks for that.

We’re planning to hire an extra person to raise our gross wages; I hope this is allowed.

[Cono Este]

Anyone think there will be any class action lawsuits against banks and how they handled the PPP?

I actually submitted my paperwork during the first round and still have no SBA #?

I’m already thinking about how, where to file a complaint.

Any advice?


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[Core Shot]

Thanks for that.

We’re planning to hire an extra person to raise our gross wages; I hope this is allowed.

It’s def allowed.
My bank spreadsheet has a line for each person in the eight weeks.
Column one, gross pay in Q1.
Column 2. Average weekly pay in q1.
Column 3, avg pay in the 8 week forgiveness.

If column one for that person is zero. All is good.

If they weren’t on payroll on q1, you can bring them on at minimum wage for 30 hours, even if they don’t work. That gets you FTEE. then spend the excess funds on your main crew that deserves it

[GoldMember]

Thanks for that.

We’re planning to hire an extra person to raise our gross wages; I hope this is allowed.

It’s def allowed.
My bank spreadsheet has a line for each person in the eight weeks.
Column one, gross pay in Q1.
Column 2. Average weekly pay in q1.
Column 3, avg pay in the 8 week forgiveness.

If column one for that person is zero. All is good.

If they weren’t on payroll on q1, you can bring them on at minimum wage for 30 hours, even if they don’t work. That gets you FTEE. then spend the excess funds on your main crew that deserves it

Yes, we're planning on bringing 2 back from layoff and hiring another at the end of this month. The goal is to get more people on payroll, not less. That's prescribed in the PPP. They want hiring to commence.

[Core Shot]

Well yes. But the idea is you can hire people not to work. That is allowed.
Even if they have another job. Or have no work and no unemployment.

Put them on payroll for minimum wage at 30 hours a week. That is one FTEE.

[bizarrefaith]

It’s def allowed.
My bank spreadsheet has a line for each person in the eight weeks.
Column one, gross pay in Q1.
Column 2. Average weekly pay in q1.
Column 3, avg pay in the 8 week forgiveness.

If column one for that person is zero. All is good.

If they weren’t on payroll on q1, you can bring them on at minimum wage for 30 hours, even if they don’t work. That gets you FTEE. then spend the excess funds on your main crew that deserves it

Problem I have with this is we have 1 or 2 guys who refuse to come in and have exhausted their time off. I understand everyone is dealing with different shit so we haven’t terminated anyone but we can’t pay them either or everyone would be out the door obviously. We haven’t “reduced” their pay but we’re going to get penalized on the forgiveness for not straight up firing them by April 26th?


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[bizarrefaith]

Don't include the PPP proceeds in gross income. Someone else is paying your bills, the benefit is ($1 - marginal tax rate) X qualified costs.

This is exactly it and remember if your profits are from a qualifying flow through entity, you get the 20% off the top, so the MINIMUM value of a forgiven loan is 70.4% vs not taking it - higher if you’re not already in top bracket


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[Core Shot]

Problem I have with this is we have 1 or 2 guys who refuse to come in and have exhausted their time off. I understand everyone is dealing with different shit so we haven’t terminated anyone but we can’t pay them either or everyone would be out the door obviously. We haven’t “reduced” their pay but we’re going to get penalized on the forgiveness for not straight up firing them by April 26th?


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You just put them on payroll for 30 hours. Even if they don’t want to work.
You can also find random strangers for 30 hours of minimum wage for not working.
Hit your FTEE.

FYI your payroll login should have an Obamacare ACA report that shows your FTEE for Jan feb of this year. That’s your target unless your payroll Peaks in winter

This is exactly it and remember if your profits are from a qualifying flow through entity, you get the 20% off the top, so the MINIMUM value of a forgiven loan is 70.4% vs not taking it - higher if you’re not already in top bracket


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Exactly. If you can make more money in the eight weeks than your tax rate.
My heads up was for a biz that can’t work at all. You’re not getting free money if they don’t allow the expense deduction.

FYI my hope and belief is that that irs ruling will be overturned.

[alias_rice]

It sounds like the bulk submission applications were approved at SBA without fully verifying if the business already had a ppp loan. I have lots of friends at Chase who were worried about their clients getting funded so they sent them my way. I probably funded 20 Chase clients this week and so far 4 of them were double funded with Chase yesterday. What a nightmare that is going to be.

[::: :::]

We got an sba approval last night

[GoldMember]

You just put them on payroll for 30 hours. Even if they don’t want to work.
You can also find random strangers for 30 hours of minimum wage for not working.
Hit your FTEE.

The problem is, if you put them on payroll, even if they're not working, they go off UI. That may be tough pill for them to swallow.

Exactly. If you can make more money in the eight weeks than your tax rate.
My heads up was for a biz that can’t work at all. You’re not getting free money if they don’t allow the expense deduction.

FYI my hope and belief is that that irs ruling will be overturned.

This won't be overturned as it's been established in past court rulings as double-dipping. You would be cash neutral on the payroll portion but ahead in covering rent/lease/mortgage interest and utilities. But yes, no free money on payroll unless they actually work and drive some revenue that also pays you for the labor as part of the sale of products/services.

[Crusty]

The problem is, if you put them on payroll, even if they're not working, they go off UI. That may be tough pill for them to swallow.




This won't be overturned as it's been established in past court rulings as double-dipping. You would be cash neutral on the payroll portion but ahead in covering rent/lease/mortgage interest and utilities. But yes, no free money on payroll unless they actually work and drive some revenue that also pays you for the labor as part of the sale of products/services.

AICPA announced they are pushing congress and IRS to allow deductions for PPP qualified costs so maybe...?

[Core Shot]

The problem is, if you put them on payroll, even if they're not working, they go off UI. That may be tough pill for them to swallow.




This won't be overturned as it's been established in past court rulings as double-dipping. You would be cash neutral on the payroll portion but ahead in covering rent/lease/mortgage interest and utilities. But yes, no free money on payroll unless they actually work and drive some revenue that also pays you for the labor as part of the sale of products/services.

AICPA announced they are pushing congress and IRS to allow deductions for PPP qualified costs so maybe...?

I’m pretty sure the non deduction will be overturned.
The irs memo is so flawed and the cares statute is so explicit.
It’s free money.
Printer go Brrrrrrrrrrrr
https://brrr.money/

[GoldMember]

One thing I misstated was the payroll portion being net neutral if there wasn't any revenue. The employer portion of FICA isn't forgivable and, of course, any pay over $8,333.33 per month.

I'll be surprised if Congress changes the deductible clause. But, maybe? It really goes against logic in my view.

[MakersTeleMark]

But, maybe? It really goes against logic in my view.

The fed govt. NFW!!!

[::: :::]

“Dear Applicant

You are receiving this message as a notification that your Economic Injury Disaster Loan (EIDL) application is currently being processed in the order it was received. You will receive an email notification when there is a change to your application status.”

^^^First contact late last night after a little over a month

But basically no info
The EIDL advance program was supposed to be a 4 day turnaround after a credit check...okaay

[Core Shot]

Eidl is useless. If you ppp.
Eidl is subtracted from your ppp forgiveness.

[Bunion 2020]

Got the same e-mail.

Problem is I received payment last week.

Useless? Not if you need a low interest bridge loan.