Did you receive money from a lender under the existing Paycheck Protection Program (PPP)? If so, you may qualify for more tax-free money. Wondering how you can claim it? allow our Accounting Firm In Columbia, MD to help.

First, let’s clarify what’s happening. When you think of the PPP program, what do you think?  “tax-free money” or “loan”? Allow me, a Tax Accountant Maryland to help.

Think “tax-free money.” That’s exactly what it is. Easy, right?

Sure, it comes in the form of a loan, and you could be under the impression that you have to pay it back—but you don’t. You just have to use 60 percent or more of it for defined or deemed payroll. Need a Small Business Accountant Columbia MD to help with it? Feel free to get in touch.

Okay, that’s good news part 1. – Read More – New PPP Forgiveness Rules for Past, Current, and New PPP Money

Now on to good news part 2. The expenses you pay with the forgiven PPP monies are tax-deductible.

It’s the perfect deal. Take advantage of it if you can today, allow an expert CPA In Columbia MD to help.

How Do You Qualify for the New Second-Draw PPP Money?

To qualify for the second-draw PPP money, you must

  1. have 300 or fewer employees;
  2. have suffered a 25 percent or greater loss in revenue during at least one quarter of 2020 when compared to 2019; and
  3. have already used your original PPP money or be planning to use it soon

Example. John had $1 million in quarterly revenue during the 2019 third quarter. In 2020, John’s third quarter showed revenue of $700,000. John meets the “25 percent or greater loss in revenue” test.

For the business that did not operate during all of 2019, alternate tests are available, such as comparing the fourth quarter of 2019 to the first, second, or third quarter of 2020.

All these calculations can get complicated if you don’t have a reliable Business And Tax Accountant by your side. Allow my CPA Firm In Maryland to help you figure it out.

How Much Can You Get?

The mechanics of the second-draw PPP loan amount follow the basic rules that apply to the original (first-draw) PPP loan, with some modifications such as the following:

  • The loans are capped at $2 million or less.
  • If you are not a hotel or restaurant, i.e., North American Industry Classification System (NAICS) code 72, you identify your average monthly payroll for either 2019 or the trailing 12 months, and then multiply it by 2.5 to find your loan amount.
  • If you are a hotel or restaurant, you multiply by 3.5.

Confused? Allow me to help. Sigma accountants are the best Tax Accountant in Columbia MD.

What Can You Use the Money For?

During a period of your choice, beginning eight weeks from the origination date of the loan and ending 24 weeks from the origination date, you must use 60 percent or more of the monies for defined and/or deemed payroll to achieve 100 percent forgiveness.

Example. Wendy obtains $100,000 in second-draw PPP monies. She spent the entire $100,000 during the nine weeks following the date she received the loan, and of that, $65,000 was for payroll. She spent the remaining $35,000 on other covered expenses. Wendy qualifies for 100 percent loan forgiveness.

Still not sure? As a qualified Small Business Accountant in Columbia MD, I help businesses, like yours manage your accounts and organize your books properly. Let me help you, contact sigma today.

Other Covered Expenses

To obtain 100 percent forgiveness, you must spend all the PPP money on covered expenses and at least 60 percent of that on defined and/or deemed payroll.

In addition to payroll, covered expenses include the following:

  • Rent
  • Interest on mortgage obligations
  • Utilities
  • Operations expenditures
  • Property damage
  • Supplier costs
  • Worker protection

Example. Janet obtains a $100,000 loan but uses only $48,000 (48 percent) for payroll. The PPP rules limit Janet’s total loan forgiveness to $80,000 ($48,000 ÷ 60 percent).

If you claim all the expenses, you will need help from a professional Tax Preparation consultant from Columbia MD. I’m a Tax Accountant that can help you.

Expenses Are Deductible

Before the recent stimulus, the IRS took the position that expenses paid with PPP loan monies that were forgiven were not tax-deductible. Some lawmakers disagreed, but the IRS held firm and told those lawmakers that if they didn’t like the IRS position, they should change the law. So they did.

Now, thanks to the new law, expenses paid with PPP loan monies that are forgiven are tax-deductible. An experienced Business And Tax Accountant can help you prepare your taxes appropriately and claim all the deductions applicable to your business.

Act Fast

If you qualify for the 2nd round of PPP money  and want the tax-free money from PPP Round 2, don’t procrastinate. When the allocated monies are gone, the funding is over. Claim the money today with the help of a Columbia Maryland CPA.

Takeaways

If you received an initial PPP loan, you can qualify for a second round (called a “second draw”) of PPP tax-free money.

To qualify for the second-draw PPP money, you must

  • have 300 or fewer employees;
  • have suffered a 25 percent or greater loss in revenue during at least one quarter of 2020
  • when compared to 2019; and have already used your original PPP money (or be planning to use it soon).

The mechanics of the second-draw PPP loan amount follow the rules that apply to the original (firstdraw) PPP loan, with some modifications. The overall limits work as follows:

  • The loans are capped at $2 million or less.
  • If you are not a hotel or restaurant (NAICS code 72), you identify your average monthly payroll for either 2019 or the trailing 12 months, and then multiply it by 2.5 to find your loan amount.
  • If you are a hotel or restaurant, you multiply by 3.5.

During a period of your choice, beginning eight weeks from the origination date of the loan and ending 24 weeks after the origination date, you must use 60 percent or more of the monies for defined payroll to achieve 100 percent forgiveness.

Expenses that can qualify for forgiveness include:

  • Payroll
  • Rent
  • Interest on mortgage obligations
  • Utilities
  • Operations expenditures
  • Property damage
  • Supplier costs
  • Worker protection

And finally, keep these three thoughts in mind:

  1. Act fast, because this money goes in a hurry.
  2. The incoming PPP loan monies are tax-free.
  3. Expenses paid with PPP loan monies that are forgiven are tax-deductible.

You will not find a better bargain. You will not find a better Small Business Accountant in Columbia MD either. We have only a few open spots. Act fast and get in touch with us now.