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Don’t Rush PPP Forgiveness Applications

Oct 8th 2020
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I have been thinking about my clients who have spent all their PPP and are eager to get the loans off their books.

In last month’s post, I discussed how sole proprietors with no payroll who received PPP may have an advantage over businesses that have payroll. Now, some of my clients have been asking me to complete the SBA Forgiveness application now and try to submit it.

Here are my thoughts on this:

1. From what I can see, lenders are still not accepting PPP forgiveness applications. Most have been sending out emails telling loan recipients to wait until further notice. Forgiveness applications should not be submitted directly to the SBA, they must be submitted to the lender.

2. The country is still waiting to see if Congress will offer more pandemic assistance and/or to see if changes will be made to PPP forgiveness rules in terms of:

a) a more streamlined forgiveness form for loans under $150K and/or

b) a revised ruling from the IRS stating that expenses paid with PPP dollars will remain tax deductible expenses. Some members of Congress have asked for this.

On September 28, House Democrats released an updated version of the Heroes Act. The legislation offers additional Cornoavirus relief, but has not yet been called to a vote, and would also have to pass in the Senate. A quick overview reveals that it does not address the deductible expenses issue, that appears to remain under the domain of the IRS.

This article on the Bench website dated 08/06/2020, “2020 Taxes: How the PPP, EIDL and PUA Will Affect Your Taxes,” has a theoretical example of how the loss of tax deductions can impact the bottom line.

And the AICPA has published a July article “5 Reasons Borrowers Shouldn’t Rush Their PPP Forgiveness Applications,” which is still relevant.

3. Since there may be no tax advantage to having a PPP loan forgiven, some businesses might fare better tax-wise by posting all PPP dollars to a Long Term Liability PPP Loan account, and repaying the loan at 1 percent interest over two or five years. This may provide a greater tax benefit than losing their regular deductions.


It is advisable for businesses to review their options with their tax preparers. Run some scenarios to see how the 2020 tax return would be impacted by the potential loss of deductions of expenses paid with PPP dollars.

If the tax return is unfavorable compared to keeping the expense deductions, consider the impact of not requesting PPP forgiveness, and treating it is a long –term loan instead.

Jody Linick is an AIPB Certified Bookkeeper, a QuickBooks® Certified Pro Advisor, and a member of the Intuit Trainer/Writer network. Her company, FitBooks Pro (formerly Linick Consulting), specializes in remote bookkeeping services for professional services firms using QuickBooks Online. You can find her series of Blog posts here.

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By [email protected]
Oct 9th 2020 14:10 EDT

3. There may not be tax advantage, but there still is economic advantage. Plan A is to borrow $30,000 and pay nothing back, because it is forgiven. If this is taxable then perhaps you pay $9,000 of taxes, and you have $21,000 left to pay expenses with. Plan B that you are considering is that you pay back $30,000 to the bank, plus a small amount of interest and you have nothing left to pay your expenses with. Which sounds better to you? (I’m assuming that you pay employees and qualified expenses the same amount in either scenario.)

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Replying to [email protected]:
Jody Linick
By Jody Linick
Oct 9th 2020 14:48 EDT

Those are good points, Craig, thanks. I still think it's worthwhile to go through the exercise to see what scenario is best for each business. Some businesses may want to consider the impact reduced Wages expense could have on their QBI deduction.

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Jody Linick
By Jody Linick
Oct 9th 2020 16:39 EDT

And here it is. On October 8, 2020 the SBA released a simpler loan forgiveness PPP loan application for loans under $50K. See the SBA announcement here.

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