Well, just when we thought we knew the rules around PPP Forgiveness and expense deductibility, the rules changed – just like that!

The U.S. Senate and House of Representatives overwhelmingly passed a $900 billion COVID-19 relief bill Monday night that provides $600 stimulus payments to individuals, adds $300 to extended weekly unemployment benefits, and provides more than $300 billion in aid for small businesses

The legislation, the Consolidated Appropriations Act, 2021, also ensures tax deductibility for business expenses paid with forgiven Paycheck Protection Program (PPP) loans, provides fresh PPP funding, makes Sec. 501(c)(6) not-for-profit organizations eligible for loans for the first time, and offers businesses facing severe revenue reductions the opportunity to apply for a second loan.

Here is an article on the key issues, and the high points for business owners are as follows: 

Business expenses paid with forgiven PPP loans are tax-deductible. This is contrary to the November IRS Rev Rule 2020-27 stating that those expenses would not be deductible in 2020. As you’re planning for tax payments at year end, and in January, be sure to take into account this new development.

PPP Forgiveness does not have to be reduced by EIDL Advances. This means that the PPP Loan Forgiveness and the EIDL Advances of up to $10,000 are all tax free.

There is a new round of PPP Loans. The maximum amount is $2 million, and it applies to the following businesses: 

Have 300 or fewer employees (500 for first-time PPP borrowers) 
Have used or will use the full amount of their first PPP loan. 
Can show a 25% gross revenue decline in any 2020 quarter compared with the same quarter in 2019.

Business Meals are 100% deductible for 2021 and 2022. This is an increase from 50% deductibility in 2020.

As 2020 comes to a close, this is definitely good news for Americans. If you have any questions on this or any other tax related matter, please feel free to give us a call.

This has been a year for the record books in so many ways. We hope you can pause during this season and reflect on the blessings of this year and be thankful for the lessons learned from the challenges.

We wish you and yours a Very Merry Christmas, and a Happy, Healthy and Prosperous New Year! 

theKFORDgroup team is ready to assist you with your tax questions.  Give us a call at (210)340-8351.

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