Tax News & Views | PPP Probs

April 6, 2020

A rocky start for implementation of the Paycheck Protection Program.  Not surprising, with $349B becoming available Friday, first-come-first-serve, to small businesses who naturally swarmed banks and business advisers. The speed at which this new program was created and implemented has left lenders and businesses with questions and uncertainty.

A sample of the questions outstanding are: 

  • Whether healthcare and retirement benefits are included in the $100,000 compensation limitation
  • Confirm that partners receiving guaranteed payments need to apply separately from the partnership
  • Whether average monthly payroll is calculated gross or net
  • Contradicting guidance on 1099 inclusion for payroll costs
  • A big potential error in the loan forgiveness calculation
  • If $349B is going to be enough

These questions are resulting in varied PPP applications from lenders; some of which are blatantly incorrect and others that have the potential to be depending on the interpretation of guidance.  Businesses need answers to these questions sooner than later to determine if the program is right for them.

Treasury has put out an FAQ…but currently it houses just one question.  Hopefully they intend to add to this or provide different guidance.

Marco Rubio has been vocal about many of these issues, and will hopefully push for providing further needed clarity.

Many others are making issues know as well including:

Paycheck Protection Program Loans: Three Things the SBA And Banks Need To Agree On Now – Tony Nitti, Forbes. “Why is it so hard to develop a universal calculation of the amount a business can borrow?”

Drafting Errors & other CARES Act issues – C. Brian Streig. “The way the final version of the bill was written contains some pitfalls for borrowers that aren’t being reported.”

Paycheck Protection Program Offers Forgivable Loans for Eligible Small Businesses – Kristine A. Tidgren, ISU CALT. “It would not seem to be Congress’ intent that an owner of an S Corporation could qualify, but a partner would not, in an otherwise identical business environment.”

Small Businesses Are Almost Out of Time, And It Matters to All of UsJonathan Doochin, Issues & Insights. “We need rapid deployment of capital from local and national financial institutions supported by the SBA and “immediate need” one-click solutions analogous to PayPal’s business loans, for instant relief until the larger loans can be made.”

Paycheck Protection Plan – Consider Alternatives – Peter J Reilly, Forbes. “The language in the legislation that is now driving accountants crazy is this exclusion from defined ‘payroll costs’”.

In other tax news...

Though the IRS recently announced the People First Initiative, taxpayers are seeing surprises.  One of the plan’s promises is to suspended tax payments under an existing installment agreement due between April 1 and July 15, 2020.  Deferred payments will not cause default but interest will continue to accrue.

However, taxpayers under these plans have noticed payments continue to be pulled from their bank accounts!  And naturally, the IRS was getting plenty of angry calls in response so the IRS posted Installment Agreement Direct Debit Frequently Asked Questions

The FAQ says the IRS will continue to debit payments on installment agreements and taxpayers need to contact their banks directly to stop auto-debits during the suspension period.  If taxpayers do suspend payment with their bank, make sure to turn back on those payments at least two weeks before the next payment is due after the July 15, 2020 suspension period ends.

And even more tax news:

Employers Can Postpone Payroll Tax Payments Under CARES – Eide Bailly. “For many businesses, payroll taxes incurred during 2020 will be considered timely paid if 50% of the deferred amount is paid by December 31, 2021, and the remaining amount by December 31, 2022.”

Low-Income Workers Without Children May Miss Out On the Coronavirus Rebates – Elaine Maag, TaxVox. “Because low-income workers who do not live with children get little or no benefit from refundable tax credits, they may have little incentive to file, except to claim over-withheld income taxes.”

Lesson From the Tax Court: The Long And Short of CDP – Bryan Camp, TaxProf Blog. “I call it Collection Delay Process for a reason.”

Estate Planners See Chance to Thin Out Clients’ Taxable Estates – Jonathan Curry, Tax Notes ($). “’Probably the best thing you can do from an estate tax standpoint for people who are estate-taxable is to set up an irrevocable trust, and then to sell assets or part ownership in an entity to the irrevocable trust in exchange for a low-interest note,’ Alan S. Gassman of Gassman, Crotty & Denicolo PA said on an April 3 webinar hosted by Leimberg Information Services Inc.”


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