Some Potential Problems With The PPP Loans
Ernie Neve, CPA
June 16, 2020
For the last two months, I’ve been watching and studying the CARES Act and the Payroll Protection Program loan systems very carefully. Overall?
I think the federal government did a really good job.
They moved quickly, they acted far more decisively than most of us could believe possible, and the overall effect was to get money into the hands of small businesses.
Were there problems? Sure.
Will there be fraud? Sure.
Should “big” companies like Ruth’s Chris have gotten millions of dollars in the first place (even if they claimed they are “giving it back”)? No.
But, for smaller firms all over the country, suddenly navigating an economy that, for all intents and purposes was closed, the PPP has been a windfall for them – the chance to do the right thing and not be punished for it.
Enter the IRS.
On or about April 30th, the IRS ruled that – in keeping with Section 256 of the Tax Code – those same loans could be taxed.
At about 37%.
So the $100,000 loan that Jim got to keep his auto repair place open and keep his people paid? That means Jim’s company is going to be taxed on it – to the tune of about 37%.
Now, the reason I’m sharing this with you is simple – Congress can overrule the IRS on this, but for those of you who received the PPP, you have to keep yourself up to date on this, because it could ruin you if you’re not careful.
I’m sharing it now because so many of our clients were able to qualify, and if “We the People” don’t take action, pay attention, and educate ourselves and our elected officials, the results could be disastrous.
As this develops, know that I’m keeping a sharp eye on this and will make every attempt to share my findings – and any rulings on it – as I learn of them. I hope – honestly – that the situation takes care of itself, but with so many things going on, the only way to be sure is to keep the pressure on the IRS and get our politicians to take action – fast and soon.
If you have any questions, please feel free to reach out, because this is a very “fluid” story that impacts us all!
All the best-