Tax News & Views PPP Loan Forgiveness Roundup

May 1, 2020

IRS: PPP Loan forgiveness triggers loss of tax deductions – Joe Kristan, Eide Bailly. “The IRS today announced (Notice 2020-32) that forgiveness of Paycheck Protection Plan loans will result in the loss of some tax deductions.”

Expenses taken into account in determining loan forgiveness under the program include payroll, payments under mortgage obligation, rent, utility payments, and certain other interest. How forgiveness is determined is still unclear; for example, it's not certain whether falling short of maintaining 75% of payroll reduces forgiveness or eliminates it entirely. That will matter in determining the deduction disallowances.

For Many Small Businesses, U.S. Coronavirus Aid Falls Short – Yuka Hayashi, The Wall Street Journal ($). “The Paycheck Protection Program requires that 75% of the funds go for employee salaries, and no more than 25% on rent, mortgage interest and utility payments. That is proving to be a deal breaker for many small businesses with modest payrolls and high rent costs, such as restaurants, salons and shops in urban areas including New York, Los Angeles and Chicago.”

Miss Out On A Paycheck Protection Program Loan? Don’t Forget About The Employee Retention Credit – Tony Nitti, Forbes. “Just as was the goal of the PPP, the ERC is designed to encourage employers to continue to pay employees during the economic downtown. Only instead of a forgivable loan, the benefit is in the form of a payroll tax credit.” 

In short, a for-profit business or tax-exempt organization can claim a refundable payroll tax credit of up to $5,000 per employee for wages paid between March 12 and December 31, 2020, but only for wages paid during a calendar quarter in which the business is either:

1) Shut down by government order, or

2) Experiencing a large drop in year-over-year gross receipts.

The credit may be offset in advance against anticipated payroll tax deposits, leaving more cash in the hands of the business throughout the remainder of 2020.

Employee Credit Guidance Arrives as Big Businesses Rethink Loans – Eric Yauch, Tax Notes($). "In several FAQs released April 29, the IRS described additional details on the employee retention credit program, which had so far been the less popular option for businesses that were also considering Paycheck Protection Program (PPP) loans."

Related: What to Know About the Employee Retention Credit

Is A Superseding Return The Answer To Your Tax Refund Problem? – Kelly Phillips Erb, Forbes. “According to National Taxpayer Advocate Erin M. Collins, a ‘superseding tax return’ may be the best fix for some taxpayers during this filing season - if the IRS can process them quickly and properly.”

A Better Way to Get Money to Low-Income Americans Through the Tax Code – Marie Sapirie, Tax Notes ($).

The earned income tax credit is an appealing potential avenue for routing immediate assistance to taxpayers who are on the cusp of economic hardship, including job loss, missed bills, eviction, and food insecurity. Elaine Maag of the Urban-Brookings Tax Policy Center has championed this approach, and Congress should seriously consider it. “Building on the statutory framework and already collected information from the EITC is a better solution than some of the other alternatives because it’s a targeted approach that should be easy to administer and provide financial assistance quickly”, Maag said.

A list of states offering an EIC can be found here.

Did Adding Trump’s Name Slow Down The Mailing of Stimulus Checks? Of Course It Did – C. Eugene Steuerle, TaxVox. “Did this take time? Of course, it did. Does it matter a lot? Well, that’s a different question.”

Virginia Beach Dishes Out Coronavirus Meals-Tax Holiday – Kay Bell, Don’t Mess With Taxes. “The Virginia Beach city council voted earlier this month to temporarily suspend its meals tax. The new prepared meals tax holiday begins on Friday, May 1, and runs through June 30."

IRS Announces New PTIN User Fee in Proposed Regulations – Frank Colella, Procedurally Taxing. “The IRS has announced, in Notice of Proposed Rulemaking REG-117138-17, the imposition of a new PTIN (practitioner tax identification number) user fee. The proposed regulations require tax practitioners to pay $21 (plus a vendor fee) to obtain, or renew, their PTIN.”

The $21 fee is a reduction from prior PTIN fees of $33 and $50, plus the vendor fee. 

PLR and other requests for IRS guidance can now be sent electronically – Sally P. Schreiber, J.D., Journal of Accountancy. “To enable taxpayers to continue to submit requests for IRS guidance during the coronavirus pandemic, the IRS is temporarily allowing the electronic submission of requests for letter rulings, closing agreements, determination letters, and information letters under the jurisdiction of the IRS Office of Chief Counsel, and for determination letters issued by the IRS Large Business and International (LB&I) Division (Rev. Proc. 2020-29, modifying Rev. Proc 2020-1).”


Today in History:

Today in 1941 Orson Welles' film Citizen Kane made its debut at the RKO Palace Theater in New York City.

Expand Full Article

We're Here to Help

We are here to help
From business growth to compliance and digital optimization, Eide Bailly is here to help you thrive and embrace opportunity.
Speak to our specialists