North Central News

Follow rules for PPP loans when filing taxes

If you received support through the Paycheck Protection Program (PPP), part of the CARES Act, there are certain things you should know about these loans related to your taxes.

So says Giselle Alexander, senior member with The Cavanagh Law Firm. Alexander said the PPP was intended to assist small businesses, though large businesses also saw benefits. Many businesses needed these loans to keep their employees working and to pay for everyday expenses so they could remain open. Business owners were told that these loans would be “forgiven” as long as the money was spent on payroll (60 percent requirement), mortgage interest, utilities and rent during the eight or 24-week period after they were disbursed.

Alexander said if you received a PPP loan that when you are doing your taxes you can deduct expenses that were paid for with the loan proceeds. She added payroll, mortgage interest, rent and utility costs are all forgivable uses of the loan. Alexander said you do not have to include forgiven PPP funds in your income. While loan proceeds forgiven by the lender generally can be included in income, PPP loan forgiveness is an exception to the general rule.

Another aspect of the PPP is that you can take advantage of the Families First Coronavirus Response Act (FFCRA), which requires some employers to offer employees paid leave for reasons related to COVID-19. However, businesses can still reap the benefits of the FFCRA tax credits in addition to using the PPP loan. Alexander said under the CARES Act, employers can elect to defer payroll taxes from March 27 to Dec. 31 of last year. She added that 50-percent of the deferred taxes accumulated in 2020 must be paid by Dec. 31 of this year and the rest by Dec. 31, 2022. However, you cannot use PPP funds for business taxes.

Alexander is an Arizona Certified Tax Law Specialist, a CPA and holds a master’s degree in Law in Taxation. She can answer your questions about PPP funds. To learn more, visit cavanaghlaw.com.

 

Like what you see? Share it!

Related Posts

Leave a reply

Your email address will not be published. Required fields are marked *

*

Our Advertisers