Tracking PPP funds and their use

[qbteachmt]

We had a question about how to track the PPP funds, but it was for proving they got used as per the program's intent.

Now the IRS is stating the use of the funds means those costs are not considered deductible expenses, to avoid double-dipping (got money not reportable as income if forgiven and then also trying to take a deduction):

https://www.journalofaccountancy.com/news/2020/may/expenses-reimbursed-by-ppp-not-tax-deductible-pay...

[abctax55]

There's much discussion on other forums that the IRS position may be overridden by Congress. 

At this stage, given the fluidity of the situation I would still track things.

[George4Tacks]

Hi there,

You’ve come to an Intuit site supporting Lacerte, ProSeries, or ProConnect Tax Online products. Please visit the QuickBooks Help site for the answer to your question.

Cheers!

😀Sorry, I just couldn't resist!😋

[sjrcpa]

You still have to track them if you want forgiveness.

[qbteachmt]

"You’ve come to an Intuit site supporting Lacerte, ProSeries, or ProConnect Tax Online products."

I posted in the Tax Talk section, because we know those doing the tracking are so likely to get this wrong or to be upset when the reality hits the fan. And it's just another developing kink in the ointment of Relief programs.

Spanked by the tax master, all in good fun  👋

[George4Tacks · Accepted solution]

Not a spanking. Really I was making fun of the format and workings of this wonderful new forum.
Yes, you need to keep track of the PPP expenses, Maybe a new expense account with subs for the various things it can be used for. CA has not yet conformed, so any loan forgiveness is not an income. The net for fed and state of CA is a zero that must be accounted for.
The All-Star from MT raised a good question.

[qbteachmt]

"The All-Star from MT raised a good question."

Oh, yeah, sorry; that was the Royal We. Not me, specifically. In general, on the forum, someone asked about keeping the money in a separate bank account, but I doubt anyone thought ahead to the Filing treatment, which is undergoing a bit of a debate.

[qbteachmt]

Here is the clarification:

https://www.irs.gov/pub/irs-drop/n-20-32.pdf

"IRS Notice 2020-32 provides guidance regarding the deductibility for Federal income tax purposes of certain otherwise deductible expenses incurred in a taxpayer’s trade or business when the taxpayer receives a loan pursuant to the Paycheck Protection Program. The guidance clarifies a point of confusion in the small business loan program to help businesses during the Coronavirus shutdowns."

[sjrcpa]

A bill has been introduced to override the IRS on this (providing they don't voluntarily yield to public and Congressional pressure to reverse themselves).

S. 3612
To clarify for purposes of the Internal Revenue Code of 1986 that receipt of coronavirus assistance does not affect the tax treatment of ordinary business expenses.

IN THE SENATE OF THE UNITED STATES
May 5, 2020
Mr. Cornyn (for himself, Mr. Grassley, Mr. Wyden, Mr. Rubio, and Mr. Carper) introduced the following bill; which was read twice and referred to the Committee on Finance

A BILL
To clarify for purposes of the Internal Revenue Code of 1986 that receipt of coronavirus assistance does not affect the tax treatment of ordinary business expenses.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.
This Act may be cited as the “Small Business Expense Protection Act of 2020”.
SEC. 2. CLARIFICATION OF TREATMENT OF BUSINESS EXPENSES.
(a) In General.—Subsection (i) of section 1106 of the CARES Act (Public Law 116–136) is amended—
(1) by striking “1986, any amount” and inserting “1986—
“(1) any amount”,
(2) by striking the period at the end and inserting “, and”, and
(3) by adding at the end the following new paragraph:
“(2) no deduction shall be denied or reduced, no tax attribute shall be reduced, and no basis increase shall be denied, by reason of the exclusion from gross income provided by paragraph (1).”.
(b) Effective Date.—The amendments made by this section shall apply as if included in the enactment of section 1106 of the CARES Act (Public Law 116–136).

https://www.congress.gov/116/bills/s3612/BILLS-116s3612is.xml 

[abctax55]

(Susan... you are faster than I am ) 🙂

[sjrcpa]

Seems like I'm spending more time on PPP than I am on tax work.

[abctax55]

I'm glad to hear that.... since I'm in the same d'mn boat 🤣 

Many clients want/need their hands held on how to *document for forgiveness* and there's only so much guidance that I will/can provide.

[sjrcpa]

SBA released the PPP Loan forgiveness application today.

https://content.sba.gov/sites/default/files/2020-05/3245-0407%20SBA%20Form%203508%20PPP%20Forgivenes...

[qbteachmt]

Intuit called yesterday to let me know my QuickBooks account info showed that I qualify for a PPP through them. Isn't that sweet of them?

[sjrcpa]

Very sweet. 🍬