Holy, Toledo!

The IRS just released guidance (Notice 2020-32) to explain that a taxpayer receiving a PPP loan will NOT be able to deduct the expenses incurred to generate any forgiveness of the loan. DID YOU HEAR THAT?!

That is absolutely insane. So, let’s say you got a PPP loan for $100,000 and you spent the required $75,000 on payroll over the next 8 weeks. Since you met the 75% test, the entire loan should be forgiven. When it is forgiven, it is NOT taxable income to you (the BIG benefit). But, we all thought that the $75,000 you actually paid for the wages would be fully deductible just like it would normally be.

Well, this Notice just released clarifies it for us (oh, yay!!) and says with the above case, you would NOT be able to deduct the $75,000 of wages.

The American Association of Certified Public Accountants (AICPA) is protesting and sending letters to Congress telling them that this violates the intent of the law….which was to provide significant help in this Covid-19 world.

Anyway, folks, LEARN a valuable lesson here….Congress can do whatever it likes. AND….it doesn’t need to tell you in a timely fashion. It can come in at the 11th hour and change everything!

In that regard, many of us are wondering what Congress intends to do about that “forgiveness” thing. In other words, just HOW will we (those of us who actually GOT one of the PPP loans) be made to “prove” that we complied? For example, for the loan to be forgiven, at least 75% of the loan proceeds must be spent on payroll in the first 8 weeks after the loan money is received. Well….what kind of proof will be required? What happens if an owner takes a bigger wage to reach that 75%? Will any of us have to PROVE that we were impacted by Covid-19? If so, HOW will we prove it to their satisfaction? IT COULD REALLY BECOME AN INCREDIBLE NIGHTMARE. AND…..they don’t have to make the rules up until they feel like it!! So, right now, we are all in the dark because there ARE NO RULES for this. That, alone, makes me ill. They could switch things up substantially and really mess us all up….and I wouldn’t put it past them given their terrific history on this!

Now, let’s address something here….I do understand that if you got $100,000 and it was not taxable AND you were, then, unable to deduct the $75,000… that means you are really, mathematically, not hurt. I get that. I mean, look at it the other way. If the loan had to be included in income, then you had BETTER be able to deduct the expenses you paid. But, if you did NOT have to include the money in income, it’s like double dipping if you ALSO got to deduct the expenses.

Nevertheless, many feel that the real intent of Congress was to provide just such a benefit to those businesses hurting due to the Covid-19 situation. AND, to make matters worse, why did they wait SO LONG to tell us?!

It could get really UGLY in the months ahead of us. I hope not. However, I would seriously appreciate it if Congress would NOT throw any bombs at us at the last hour! Please, please, Congress……any more surprises for us? Anything else we need to know before we go and commit ourselves to a course of action that we would NOT have done if we had only known what havoc we were unleashing on ourselves? How about you lay out the rules BEFORE we play the game?

Well, honestly, the IRS has NEVER asked my opinion on anything and they never will. Congress and Treasury have a mind of their own and they operate on their counsel. You and I have no input to their ears. So, keep your ears open, read any tax stuff that passes you eyes. AND….seriously, if you see any tax articles on this stuff, PLEASE do not assume that I have already seen it….just get me a copy, ok? You can call my office, email me or whatever else works, but get me a copy so I can review it.

Whew…..gotta love these curve balls from Treasury and Congress, huh?

OK, keep safe and well. My wife and I just made a trip up and back to Portland. We didn’t touch anything and we stayed a good distance from everyone…even our grandkids who gave us “air hugs”. Portland is a different city now. Very poignant to see. Of course, you can always see people who are not taking the situation seriously, but that is everywhere. I hope you all are taking it seriously.

And, then….there are the “crazies”. You know who they are! They are convinced that this whole Covid thing is a conspiracy on the Democrat side! It’s the only way they can make Trump look stupid since they couldn’t impeach him and get him out of office. Wow, people. Things are crazy enough already without that stuff. Let’s just hunker down and take care of each other and those who are really taking a big hit over this stuff. Order out from your favorite restaurants. Ask your friends how you can help them. There is SO much we can’t do, but there is also a LOT we can do….so let’s get busy!