Author Topic: SBA PPP and EIDL Small Business Loans (some money is forgivable)  (Read 198968 times)

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Re: SBA PPP and EIDL Small Business Loans (some money is forgivable)
« Reply #2340 on: August 14, 2020, 12:57:38 AM »
Because if on the business side its not taxable, than you dont have to include it on schedule C line 1 as its not a taxable source of income, as so where should it show up on your return?
If its not on Schedule C how will it be transferred to Schedule SE?

Exactly my point. Why is anyone even trying to make a case that it shouldn't be included?

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Re: SBA PPP and EIDL Small Business Loans (some money is forgivable)
« Reply #2341 on: August 14, 2020, 01:00:30 AM »
Exactly my point. Why is anyone even trying to make a case that it shouldn't be included?
IT definitely shouldn't. PPP is a loan that was cancelled, while usual Canceled debt is taxable, congress excluded this canceled debt from taxation. As though where should this amount show up?

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Re: SBA PPP and EIDL Small Business Loans (some money is forgivable)
« Reply #2342 on: August 14, 2020, 01:02:24 AM »
So where on schedule C will you have to enter the PPP amount?

Either line 1 or perhaps Schedule 1 line 8.
I do think the IRS needs to clarify, but I don't think it makes sense to dismiss it is as tax free when every other type of PPP recipient will pay payroll taxes on their portion.

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Re: SBA PPP and EIDL Small Business Loans (some money is forgivable)
« Reply #2343 on: August 14, 2020, 01:03:39 AM »
IT definitely shouldn't. PPP is a loan that was cancelled, while usual Canceled debt is taxable, congress excluded this canceled debt from taxation. As though where should this amount show up?

They're not letting you take the expense as a deduction though so technically it's a wash... again that was all referring to the business side of things which is not the case here.

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Re: SBA PPP and EIDL Small Business Loans (some money is forgivable)
« Reply #2344 on: August 14, 2020, 01:10:33 AM »
They're not letting you take the expense as a deduction though so technically it's a wash... again that was all referring to the business side of things which is not the case here.
If you give a $10,000 gift to a corporation (not in the course of ordinary business) than it is not taxable . if the C corp/S corp takes the $10,000 as payroll than it will be considered income to the recipient. However if a SP receives a $10,000 gift than it defintely makes sense that it is not taxable at all as its not considered income. (IMO)

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Re: SBA PPP and EIDL Small Business Loans (some money is forgivable)
« Reply #2345 on: August 14, 2020, 01:14:53 AM »
INTERESTING IF THEY WILL CHANGE IT FOR GENERAL PARTNERS AFTER THE NEW GUIDELINES THAT THEY MUST TAKE AN ACTUAL DRAW, HOWEVER AS TO SP IT SEEMS TO STAND ACCORDING TO THIS

https://news.bloombergtax.com/daily-tax-report/insight-the-taxation-of-payroll-protection-program-loans-and-loan-forgiveness-62

Favorable Tax Treatment of Self-Employed Individuals and General Partners
Another key issue regarding the taxation of PPP loans is the disparate, and favorable, treatment afforded self-employed individuals and general partners in partnerships. For these two classes of borrowers, they will receive tax-free loan forgiveness like everyone else, but they will not suffer expense disallowance with regard to their owner compensation replacement amounts because such amounts are not otherwise deductible, i.e., there are no deductions to disallow.

Thus, a self-employed individual filing Schedule C with her Form 1040 income tax return will realize tax-free income of up to $15,385 if she uses an 8-week covered period on her PPP loan, and up to $20,833 if she uses a 24-week covered period on her PPP loan. The same result will obtain for a general partner in a partnership that receives a draw (as opposed to a guaranteed payment) for her owner compensation replacement amount. Note this favorable treatment applies only to the owners compensation replacement amounts of self-employed individuals and general partners, and it does not apply to any payroll costs of employees.

These favorable disparities (though whether they are viewed as favorable depends on one’s vantage point) are not the result of special tax rules under the PPP. Instead, they arise from general tax principles and from the fact that the tax-free loan forgiveness amount is the salary for these folks. There is no third party receiving tax-free income and then claiming a deduction for the payment of salary to them. A similarly-situated employee that works for a corporation, partnership, or self-employed individual will not receive this same beneficial tax treatment because they are receiving a taxable salary from their employer, and the employer is the person that received tax-free loan forgiveness (and expense disallowance). The IRS is aware of this issue and may issue further guidance.
« Last Edit: August 14, 2020, 01:20:14 AM by thebudgetdeals »

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Re: SBA PPP and EIDL Small Business Loans (some money is forgivable)
« Reply #2346 on: August 14, 2020, 01:20:30 AM »
And now we can criss-cross back to the unemployment forum...
If its just considered a non-taxable canceled debt, does it have an effect on unemployment claims? Is it considered income at all?

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Re: SBA PPP and EIDL Small Business Loans (some money is forgivable)
« Reply #2348 on: August 14, 2020, 09:37:00 AM »
And now we can criss-cross back to the unemployment forum...
If its just considered a non-taxable canceled debt, does it have an effect on unemployment claims? Is it considered income at all?

 :) you want to make the claim that PPP, funds the government set aside to keep people off unemployment, should not count towards unemployment?  :)

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Re: SBA PPP and EIDL Small Business Loans (some money is forgivable)
« Reply #2349 on: August 14, 2020, 09:52:23 AM »
:) you want to make the claim that PPP, funds the government set aside to keep people off unemployment, should not count towards unemployment?  :)
I'm not claiming anything I'm just writing facts. PPP to a SP is structured as a loan from the govt for which the repayment requirement has automatically been canceled therefore it stays in the SP personal bank account. A SP that receives a loan from his CC company and than he settles with CC company on the loan amount does it affect his ability for unemployment? I believe that NO.

(Don't speak to me about government intentions because what was the govt intention by giving $3500 a month unemployment benefits to someone who loosed his $1,000 monthly job!!!!!! :P)

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Re: SBA PPP and EIDL Small Business Loans (some money is forgivable)
« Reply #2350 on: August 14, 2020, 10:13:55 AM »

(Don't speak to me about government intentions because what was the govt intention by giving $3500 a month unemployment benefits to someone who loosed his $1,000 monthly job!!!!!! :P)

This I have to agree with...

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Re: SBA PPP and EIDL Small Business Loans (some money is forgivable)
« Reply #2352 on: August 17, 2020, 05:03:42 PM »
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Re: SBA PPP and EIDL Small Business Loans (some money is forgivable)
« Reply #2353 on: August 25, 2020, 01:55:26 PM »
New SBA interim rules rules released yesterday.
https://home.treasury.gov/system/files/136/PPP--IFR--Treatment-Owners-Forgiveness-Certain-Nonpayroll-Costs.pdf

Detailed writeup on all recent rule changes in my signature block below.

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Re: SBA PPP and EIDL Small Business Loans (some money is forgivable)
« Reply #2354 on: August 25, 2020, 03:53:43 PM »
Detailed writeup on all recent rule changes in my signature block below.
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Re: SBA PPP and EIDL Small Business Loans (some money is forgivable)
« Reply #2355 on: August 25, 2020, 03:56:13 PM »
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Re: SBA PPP and EIDL Small Business Loans (some money is forgivable)
« Reply #2356 on: August 25, 2020, 04:34:56 PM »
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Re: SBA PPP and EIDL Small Business Loans (some money is forgivable)
« Reply #2357 on: August 25, 2020, 05:28:51 PM »
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Re: SBA PPP and EIDL Small Business Loans (some money is forgivable)
« Reply #2358 on: August 28, 2020, 11:05:46 AM »
Client got an EIDL Decline due to not showing a economic injury.

How did they come up with that? the application is only asking for Sales and COGS?

He has very bad credit, but the denial doesn't mention his credit. Is there a point in appealing it?

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Re: SBA PPP and EIDL Small Business Loans (some money is forgivable)
« Reply #2359 on: August 28, 2020, 12:32:02 PM »
Client got an EIDL Decline due to not showing a economic injury.

How did they come up with that? the application is only asking for Sales and COGS?

He has very bad credit, but the denial doesn't mention his credit. Is there a point in appealing it?
If his credit is below 570 don't bother because they won't approve him anyway.