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On November 18, the IRS doubled down on ticking off us accountants and small business owners. I don't usually dump a lot of my opinion out here, but this made me cringe.
Throughout the rollout of the PPP, the IRS has said that the expenses paid with forgiven PPP funding would not be considered deductible. This means that after you calculate your profit, you have to add back the money you spent from the PPP that was forgiven.
Why is this not good?
This means that taxable income and thus the taxes owed for the over 5 million small businesses that received PPP funding will go up. Most small business owners do not have that money in their bank accounts and were not expecting this. They were instructed to spend it and needed to in order to stay in business, especially with another possible shutdown looming.
You may be thinking "okay so I will just apply for forgiveness in 2021 and deal with it then." The update also said that PPP funding is assumed to be forgiven as of the end of 2020, so the expenses are not deductible even if you have not started the forgiveness application yet.
So, what should you do?
If you received PPP funding, meet with your accountant before beginning the forgiveness application process. We can help with finding ways to simplify the process and save you as much money as possible