Paycheck Protection Loans May Tax Qualified Small Businesses KOLR
SPRINGFIELD, Mo. – Small businesses that have taken out a paycheck protection loan (P3) can now face a large tax bill.
Rick Snelson qualified for a PPP loan for his company, Car-fi, where he employs 20 people.
“It was a scary time,” Snelson said. “When the opportunity arose to get the loan, I jumped on it.”
Small business owners normally deduct expenses such as payroll, rent, and utilities. However, business owners who have taken advantage of this government assistance to keep their businesses afloat and their employees paid may not be able to take advantage of these deductions.
“At the time the PPP loans were offered, we really didn’t have any details and we had no idea how long our shutdown would be,” said Greg Murdaugh, owner of Piano Craft. “Or how long it would take for the business to come back at all, so we were really in the dark.”
Carrie Brown, CPA for Elliot Robinson and Company, said the bill was drafted, passed and distributed quickly to small businesses.
“The intention of Congress at the time of drafting and passing the law was that these funds do not create a taxable event for these taxpayers,” Brown said. “The IRS moved fairly quickly to pass the law. They basically informed taxpayers that there was a specific area of the tax code that was going to be enforced. “
Brown said that since May, the House and Senate have introduced several bills to protect business owners from a taxable event.
“We spent most of the summer and fall waiting for clarification and potential legislation that would change that,” Brown said. “In mid-November, we received this clarification and the IRS is holding on.”
For Brown, there is still a silver lining that a bill could pass for the tax exemption.