Paycheck Protection Plan (PPP) Could Be the Best Loan You Ever Got

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The first round of PPP loans went fast but, as we later found out, they didn’t all go to small businesses as intended. There were a lot of big, publicly traded companies that got them. Most of them have now paid them back. (Due date was originally 5/7/2020, but that was pushed back to 5/14/2020.)  

 Some borrowers are having second thoughts about the PPP loan they received. Maybe they’re concerned that they had other sources of capital and so they didn’t really need it.  

 That’s one of the issues that the SBA has cited as grounds for “consequences.” You took the PPP loan when you really didn’t need it and now, you’re worried you could get in trouble. 

That’s a good reason to return it.  

 Another possible issue might be that you’re rethinking your strategy if you’re a Solopreneur. In CoronaTax I use examples of when you might want to think like an employee and claim unemployment and when, instead, you may want to think like a business owner and apply for PPP and/or EIDL. Some people tried to get both, which could have made sense if they had gotten the PPP loan right away. Now, it doesn’t make sense because by the time they spend the 8 weeks for salary there is very little time left on the Pandemic Unemployment Insurance, which expires 7/25/2020. 

For example, let’s say you receive your PPP loan on 5/10/2020. You now have 8 weeks to spend it in accordance with the rules so that you receive the grant. That means you don’t have to pay it back.  

As the only employee, your company pays you your salary for 8 weeks and that becomes the grant portion. Then, your company lays you off and you can eligible for unemployment. But with the long time periods it took for the average small business owner to receive money, you have until mid-July until you’re free to collect unemployment. And the PUI expires on 7/25/2020. 

You’re out of time. 

It may make more sense to just return the PPP and start all over with an unemployment claim as a solopreneur or self-employed person.  

 Which is best? That’s where it comes to strategy. That’s what we emphasize in CoronaTax, now available at 

 Strategy. Then implementation.  

 With a strategy first, you could make the wrong move and end up not just missing out on a big opportunity but actually costing you taxes big-time.  

Now we have a second round of PPP money and finally we’re seeing truly small businesses getting funding.

If you’re one of the small businesses that just recently got funded, or you’ve received notice that you soon will be,  

 The clock starts ticking the minute you get the money.  Pay attention. This is not a deadline you want to miss if you want to turn the money into a tax-free grant.  

 If you spend the money in accordance with their rules within 8 weeks of receiving the money, it is forgiven. To be honest, even if you don’t make the deadline, you end up with a loan that is just 1% interest rate per annum. That’s a great loan. But first, let’s see if you can get the grant.  

 You need to spend at least 75% of the money on qualified payroll expenses. You have to have the same number of FTE (full time equivalent employees) that you had, on average, in the past. And you need to spend as much as possible in the 8 weeks immediately after you get the money.  

 Qualified payroll expenses include gross payroll, health insurance premiums attributable for that period and retirement plan contributions. These are all for the 8-week period. You don’t get to count retirement plan contributions for prior years or health insurance premiums for months in advance. It’s for that 8-week period only.  

 FTEs have to do with the number of hours. If you have two half time employees, for example, you have 1 FTE. If your 2 half time employees don’t come back to work, you can replace that position with another 2 half time employees or with a full-time employee.  

The SBA and Treasury Dept have added additional rules and interpretations. One of the changes was Rule #31 which was added to put some teeth into the requirement that PPP borrowers truly needed the money. They have been given until 5/14/2020 to return the money if they’re not. 

The IRS has ruled that if a business uses payroll expenses as part of the grant qualification process that they can’t then get a tax deduction for them. 

For example, let’s say your monthly business income is normally $30,000. Your expenses are $20,000. Of those, $15,000 are used against the PPP advance of $15,000. 

Your normal taxable income would be $10,000 ($30,000 – $20,000). The grant of $15,000 was supposed to be tax free, but you just lost $15,000 of deductions. That means you now have taxable income of $25,000 ($30,000 – $20,000 + $15,000). It’s not tax free at all! 

Another surprising change came when restaurant owners and other small business owners said that they were having trouble getting their old staff back. The PPP only guaranteed income for 8 weeks and in some states, the business couldn’t reopen. If they could find someone to come to work, there wasn’t any work.  

 As long as they can prove they tried to hire back an employee, they can use the payroll they WOULD HAVE paid as a deduction against the grant. 

In that case, they got a grant and didn’t have to pay any cash. Sure, they didn’t get a deduction but they also didn’t have to pay money out. It seems like they are the real winners with the PPP loan/grant. 

We’re seeing a lot of changes with CoronaTax. That’s why there are a couple of bonuses I offer when you pick up your copy of CoronaTax at  When you register your book, you will continue to receive important updates that weren’t covered in the edition you have. And when the next edition of CoronaTax is released, you’ll get a coupon that gives you 75% off of the regular price of the next edition from USTaxAid. 

CoronaTax is the first user friendly guide to the confusing maze of loans, grants and the massive tax overhaul. Get a jump on what you can do right now to get your fair share. Don’t miss out by not knowing!

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