My question has to do with PPP loans that are forgiven.
We were promised by Congress & the Presidents these loans would be forgiven and tax free if we followed the guidelines.
Later the IRS told us the expenses paid by the forgiven loans would be non deductible. This means the loan forgiveness is actually taxable and this is goes against the intent of Congress.
Is anything being done to reverse the IRS ruling ? This affects a whole lot of our clients and myself.
This discussion has been locked. New comments cannot be posted on this discussion anymore. Start a new discussion
"We were promised by Congress & the Presidents these loans would be forgiven and tax free if we followed the guidelines"
I don't believe anyone promised that there wouldn't be tax ramifications from the loan forgiveness.
Ukraine - hang in there
It seems obvious that Congress MEANT for it to be tax-free. But they didn't write the law that way, so the IRS ruled the way that they did.
In order to correct it, Congress needs to correct it. So if you and your clients are so inclined, write to your Congress person. But since Congress seems to be pretty useless and only argue all of the time, it is questionable if writing to them will have any effect.
My issue is the disparity between employees and self-employed folks.
If I'm a Sch C filer with no employees, my PPP money is based on my net earnings and is tax-free. I can go spend that tax-free money however I want, vacation, a new boat, hookers & blow, etc.
If, instead, I have 25 employees and their payroll was used to determine the PPP loan, then I'm paying payroll with tax-free money so I'd be double dipping if I got the money tax-free and then also got the deduction for the expenses. But the employees don't get the money tax-free so they get a W-2 at the end of the year and the paychecks they used to buy a boat are after-tax.
"This means the loan forgiveness is actually taxable and this is goes against the intent of Congress."
No, it's the opposite of that statement. Because the funds are not going to be reported as income, you do not Also get to write off the specific expenses paid for by these funds. It would be Double Dipping to get these costs covered by the program and also get to write off these as expenses, in other words.
So, it will be a Wash.
1. Report the income and write down the expense = net 0.
2. Don't report the inflow as income and don't report the outflow as expense = net 0.
"Level Up" is a gaming function, not a real life function.