An Important PPP Loan Update For Pasadena, TX Business Owners

by | Dec 11, 2020 | Blog

There’s both good news (for some) and bad news (for many) as we round the corner into December.

And I’m not talking about our culture, or politics, or sports, or anything like that.

I’m talking about TAXES.

I’ll start with the good news. This is applicable to some of my readers only, but it is nice news for Pasadena, TX business owners in certain high tax states.

One of the difficult aspects of the TCJA was the “SALT” (state and local tax) deduction limitations. Specifically in high-tax states, this represented a difficult setback in what could be deducted.

Well, one semi-sneaky way around this limitation has just been tentatively approved by the IRS in Notice 2020-75: paying these taxes on behalf of the owner or partners through an S-corp or partnership (pass through entity), and enabling them to be counted as a business expense.

This workaround immediately came into effect in MD, LA, CT, NJ, OK, RI and WI. Four more states already have legislation on the dockets: AL, AR, MI and MN. And (perhaps not surprisingly), NY and CA — the two biggest states in this category — are expected to act quickly.

There is a rumor that this could be retroactive to 1/1/2018. But until we know for sure, we still need to get the final regulations from the IRS. They have promised we’d have them soon.

So that’s the good news.

The bad news is this:

The IRS recently ruled definitively that expenses paid for with PPP proceeds are NOT deductible.

This has been an open question, and it is STILL a bit of an open question … but what they clarified is that the timing of the forgiveness won’t affect the tax treatment of these expenses.

Essentially, if a Harris County business “reasonably believes that a PPP loan will be forgiven in the future”, expenses related to the loan aren’t deductible whether or not the business has filed for forgiveness.

But also — if a business does NOT apply for forgiveness, or is denied, those expenses will be deductible.

It’s probably best to operate as if this is the settled answer, even though there are many (like the AICPA) who are advocating for a Congressional fix.

It’s worth a conversation for planning purposes if you need guidance.

And it’s also a signal that if your Pasadena, TX business took a PPP loan, there isn’t any tax benefit to be gained by delaying the forgiveness process. So … it’s a good idea to start on that.

281-998-7499 

Either way, we’re here to help.

To more of what’s yours, in your pocket…

Warmly,

Brandon Jordan
(832) 672-7530
Sandra Tapia, CPA, PLLC

 

Feel free to share this article with a Pasadena, TX area (or beyond!) business associate or client you know who could benefit from our assistance. While these particular articles usually relate to business strategy, as you know, we specialize in tax preparation and planning for families and business owners.

Let Us Help:

NEW STRATEGY FOR YOUR FINANCES

Hiring a Consultant for Your Pasadena Business

Hiring a Consultant for Your Pasadena Business

Remembering and honoring Martin Luther King this week has me thinking once again about being a voice. It’s hard not to get inspired listening to the iconic words of the famous I Have a Dream speech (if you’ve never listened to the entire speech, it’s worth...

Mastering Your Pasadena Business Phone Answering

Mastering Your Pasadena Business Phone Answering

How is your year starting out? We’re into week 2 of 2023 … would love to hear back from you on what are the challenges you’re facing in your Pasadena business finances right now.Relatedly, what are your customer service goals for this year?One customer relations tool...

Accepting Crypto Payments in Your Pasadena Business

Accepting Crypto Payments in Your Pasadena Business

First of all, congratulations on making it through 2022. Pat on the back for sticking with it through the very real ups and the challenging lows. Many of our Pasadena clients went through the wringer … others had their best year yet.From a personal standpoint, I think...

Federal Spending Impact on Pasadena Businesses

Federal Spending Impact on Pasadena Businesses

I don’t know about you, but after the holidays (and I hope yours were filled with good things and happy times with loved ones), I’m always a bit tapped out on the spending. But in true governmental fashion, Uncle Sam is piling it on. Seems like Congress missed...

Succession Planning Strategy For Pasadena Business Owners

Succession Planning Strategy For Pasadena Business Owners

The 2022 clock is almost at midnight.An end to a still somewhat crazy year — “the crazy” seems like our new normal, post-2020, am I right? There were a lot of challenges this year and they were … exhausting. Keeping up with the changes and adjusting to the economic...