Thoughts on PPP Forgiveness

Jul 22nd 2020
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I’ve been thinking about the PPP and what comes next. If you’re like me, you’ve noticed there have been innumerable articles, webinars, etc. on the PPP from the start. At first, it was all about what is it, who is eligible, how to apply for it, where to apply, how to advise clients (and should that advice be billable or free), and how to enter receipt of PPP funds into accounting software. In June Congress passed a bill making some changes to the PPP, and the cycle of articles and webinars started anew regarding what had changed, and the impact of the changes. Now many of our clients have not only received PPP, but have spent it all. So the latest cycle is how to complete the forgiveness applications, how to use forgiveness calculators, how to calculate if there was an FTE reduction or not, whether to use the 8-week schedule or 24-week schedule, etc.. There is a lot of good information out there, from reliable sources.

That being said, it feels like we are in a waiting room right now. Here’s what we are waiting to find out:

Will PPP Loans Under $150K Be Summarily Forgiven?

According to a July 9 article in the ABA Journal, the American Bankers Association has “joined a broad coalition of nearly 150 trade associations and advocacy groups in strong support of a bipartisan bill that would expedite the forgiveness process for most borrowers who received loans.” The bill calls for a one-page forgiveness form to be filed. PayPal’s Government Relations division has created an online petition to request the same (feel free to read it and decide if signing on is the right choice for you and/or your clients). 

Takeway: We will have to wait and see if additional legislation is passed. It appears that the PPP lenders are waiting for more direction as well, as none (that I am aware of) are currently accepting loan forgiveness applications –most are saying that will ready to accept forgiveness applications in August. 

How Will Expenses Paid by PPP Loans Be Addressed by the IRS?

PPP loans are touted as being non-taxable income, but what about the expenses paid with PPP funds? Will the IRS allow them to be counted as deductible business expenses, as per usual, or not? A May 4 article by Miri Forster of EisnerAmper says that per Notice2020-32, “expenses reimbursed by the PPP loan for payroll costs or payments of mortgage interest, rents and utilities during the covered period are not deductible by the borrower.” While there is a zero net effect of receiving PPP funds, and not claiming the related deductible expenses, she goes on to say, “Senator Chuck Grassley (R-IA) issued a statement that the notice is contrary to the intent of the PPP, which is “to maximize small business’ ability to maintain liquidity, retain their employees and recover from this health crisis as quickly as possible.” Richard Neal (D-MA) indicated that a fix to the above situation could come with the next legislative response to COVID-19.”

I also found a post by John Anthony Castro of Castro & Co. International, an article titled, “Expenses Paid with a Forgiven PPP Loan are Deductible, IRS is Wrong.” He centers his argument on the question of whether or not PPP funds are considered “wholly exempt income” or not; it’s a fascinating legal argument. 

Takeaway: We will have to wait to see if the IRS provides a definitive ruling. As such, we have some more time to consider exactly how to do the [potential] bookkeeping that may be required to isolate PPP spending and move it to a non-deductible expense account on the Chart of Accounts and P&L. 


Business owners, bookkeepers and accountants are all in a holding pattern when it comes to closing out PPP loans on their books, as we wait for more potential action from Congress on PPP forgiveness for loans under $150K, and from the IRS on the deductibility of PPP expenses. We will have to be patient, and flexible, as we all have been throughout the Covid-19 pandemic.

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 called 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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QBO Trainer
By [email protected]
Jul 22nd 2020 12:44 EDT

Yes, Jody, I agree - great article describing the current conversation among clients and accounting professionals. Many businesses are seriously concerned about how this will all pan out. They are specifically worried about the tax ramifications. I have been putting forth a positive attitude to my clients and helping them to focus on their business and not how and what is going to happen with the PPP. Let's keep our fingers crossed that the forgiveness process will be streamlined and tax requirements not over the top complicated.

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