Podcast: How to Navigate a Filing Season Complicated by PPP

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Key Points:

• The Paycheck Protection Program complicates filings for 2020 and 2021.
• The timing of PPP loan forgiveness led to unintended consequences for tax year 2020.
• New laws and amendments to PPP continue to impact tax filings.

On this episode of Weaver Beyond the Numbers, real estate edition, Howard Altshuler, Partner-in-Charge, Real Estate Services for Weaver, and Rob Nowak, Partner, Tax Services for Weaver were joined by David Vasquez, Partner, Business Tax Services for Weaver for a conversation about the questions and issues around the Paycheck Protection Program (PPP) first instituted in March 2020.

Over the last six months, there have been several clarifications in terms of what is deductible and regarding questions surrounding loan forgiveness and taxable income. While there is relief in these clarifications, there are still several complexities and challenges in tax filing for 2020. These complexities and challenges are most prevalent when PPP deductions and subsequent loan forgiveness straddle two tax periods.

“We started to notice a potential disconnect, and that is that, while the expenses are deductible in 2020, for those taxpayers that received forgiveness in 2021, their forgiveness and increase in basis will happen in 2021,” Vasquez said.

Are PPP loans considered an at-risk liability for the purposes of deducting tax losses?

“The way the law is written, you kind of get the best of both worlds from the deductibility of the expense and the non-taxability of the income,” Altshuler said.

While the PPP is new, it isn’t finished. The government continues to pass new laws and amendments that alter the big picture and perhaps repair some of the unintended consequences of a quickly assembled restructuring of tax law for 2020 and 2021.

Altshuler, Nowak and Vasquez have the knowledge to delve into this topic and answer the vital questions brought about by the PPP.

“I’ve talked to a number of people who had debt covenants and the thought process for 2020 is you kind of just throw them out the window, because everything else, financially speaking, has been thrown out the window,” Altshuler said.

Experienced tax service partners can help clients stay on top of these changes.

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