PPP loan and reducing expenses - Spidell

PPP loan and reducing expenses

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Message Board PPP loan and reducing expenses

  • This topic has 5 replies, 4 voices, and was last updated 1 week, 3 days ago by Sandy Weiner.
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    • #271612
      Susan Nepodal
      Participant

      I have a client with a June year end who received a PPP loan.  Do we know yet if we reduce the expenses that are related to the PPP loan for his year ended June 30, 2020 or wait until they have been forgiven?  A further complication is that they had a NOL in 2018 (6/30/19) which we have to decide whether we carry forward or carryback (never much income with this client).  Also have to pay any tax due on September 15th.  (We are putting them on extension but wondering if there is any guidance on this yet due to taxes due).  There will be tax due if we have to reduce the PPP related “expenses.”

    • #271976
      Lynn Freer
      Participant

      We don’t have any guidance on how the forgiveness will work if in another year.

    • #273661
      Anonymous

      I have the same problem.  Client with June 2020 yearend wants to take the PPP deductions now.  the loan has not yet been forgiven.  He wants to report the PPP money as income in fiscal year June 2021 after the loan is forgiven.  Legally he still had a loan at June 2020….

    • #273685
      Lynn Freer
      Participant

      We think businesses will have a hard time trying to claim deductions in the current year and then wait until the following year to pick up the PPP as income.
      <div></div>
      <div>Remember, forgiven PPP funds are not income, but if any expenses are paid with forgiven PPP funds, the expenses are not deductible. I think any business whose tax year ends before they know how much of their PPP loan will be forgiven must file an extension and wait until they know. This is similar to a taxpayer who has a like-kind exchange that straddles two tax years. You need to file an extension until the entire transaction is complete.</div>
      <div></div>

    • #273854
      Anonymous

      Lynn, I read the R&TC (which is different than the federal PPP loan provisions) and am again confused…Now for CA taxes. R&TC Sections 17131.8 and 24308.6 as approved by the Governor say “for taxable years beginning on and after January 1, 2020”. The June 30 and September 30 fiscal year corporations that we are dealing with have taxable years beginning before January 1, 2020. Since the PPP loans will be forgiven in FYB after 1-1-20, the expenses in the FYB before 1-1-20 won’t be deductible?? Why did they include those dates?? We are planning to do exactly as you say…don’t plan on the expenses being deductible and file an extension but am wondering if you had any insight as to why they added the “for taxable years” dates.

    • #273869
      Sandy Weiner
      Participant

      Interesting question.  As you noted, AB 1577 doesn’t address fiscal year taxpayers.  We’ll look into this further and get back to you.

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