CoronaTax and SBA Loans. What You Don’t Know Can Cost You | USTaxAid

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CoronaTax and SBA Loans. What You Don’t Know Can Cost You

Written by Diane Kennedy, CPA on January 3, 2021

I’m getting a lot of questions about PPP1, PPP2 and EIDL loans and forgiveness programs.  

The PPP1 is the Paycheck Protection Plan was part of the March 2020 CARES Act. It was a loan for businesses. If you spent the money in accordance with the rules, it will be forgiven. That means you don’t have to pay it back. 
The PPP2 is the second Paycheck Protection Plan that was part of the December 2020 CoronaTax bill. Businesses that meet the following rules can apply for it: 

1. 300 or fewer employees,  

2.Business received a PPP1 loan, and 

3.Had a 2020 quarter where gross receipts was reduced 25% or more from the previous year’s corresponding quarter.  

EIDL (Economic Injury Disaster Loan) is a loan that comes from the SBA. You will get an SBA advance of up to $10,000 that can be forgiven. 
Here are some of the questions that I’ve recently received regarding these programs.  

#1: Where can I get a PPP1 or PPP2 loan?  

PPP1 and PPP2 loans are offered by banks and approved Fintech companies. As of this morning, I didn’t see that any of them had their program up and running, but I suspect we will see them soon. Here is a list of approved Fintech companies from last go round. Presumably most (probably all) will be participating again. 

#2: How do I get the new one page forgiveness form?  

The lender who handled your PPP loan will have that. It’s probably not ready yet since this was just passed into law. So, if you used Bluevine for your PPP loan, get the forgiveness form from Bluevine. If you used Chase, get the forgiveness form from Chase. Etc. 

#3: How do I get the EIDL/PPP loan & forgiveness corrected? 

 Wait. This is brand new law. Prior to the December 2020 law, your PPP loan forgiveness was reduced by the amount of EIDL advance.  Now we have new law. 
You do NOT have to reduce the PPP forgiveness by your EIDL advance. Your PPP lender will be the one to correct that, but the law is new. Give them a little time to get the process figured out.  

#4: How do I get my EIDL advance forgiven?  

That is done through the SBA. Go to their SBA.gov website.  

#5: What if I didn’t get all of the EIDL advance due me? 

If you got some, you probably got all that is due you. It’s calculated as $1,000 per employee up to $10,000.  

#6: What if I didn’t get my EIDL advance at all?  

You probably got your loan after the SBA had run out of advance money. The budget has been doubled and they have money again. Give them 3 weeks to catch up. If you still haven’t gotten it after that, contact the SBA.  

For PPP loans, advances and questions, go to your PPP lender.  

For EIDL loans, advances and questions, go to the SBA.  

But for now, wait. They need a little time to get everything caught up. 

#7:  Is the PPP grant taxable?  

The PPP1, PPP2 and EIDL advance are all NON taxable. The EIDL loan is non taxable as well because it’s a loan that you have to pay back. 
In the case of PPP1, PPP2 and EIDL, Congress originally said that PPP1 and EIDL advance were non taxable, but then the IRS and Treasury Sec Mnuchin said that the cash received might be non taxable but then you had to reduce your tax deduction.
In essence, the ruling by the IRS and Mnuchin meant that the PPP1 and EIDL advance became taxable.
Congress clarified it once and for all. It’s not taxable. And it does not impact your deductions.
It is NOT taxable.  

We’ll likely see a lot more changes coming as the new law is filtered through the SBA and IRS. Keep checking Diane Kennedy’s US Tax Group on Facebook for the latest information.
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