Small businesses rejoice! Sigma accountants, Small Business Accountants in Columbia MD come bearing Good news.
The new Paycheck Protection Program (PPP) law enacted with the stimulus package adds dollars to your pockets if you have or had PPP money.
Before we go further, please note the PPP money comes to you in what appears to be a loan. We say “appears” because you typically pay back a loan. If you are a doctor or a medical practitioner that’s looking for help with accounting and taxation please allow Sigma Accountants, CPA For Doctors in Maryland, to help.
Done right, however, the PPP loan is 100 percent forgiven. The word “loan” makes some businesses leery of this arrangement. Don’t be. The PPP monetary arrangement is a true “have your cake and eat it too” deal but only if you have a professional and qualified Tax Accountant in Maryland to guide you.
And this remarkable deal applies to your past PPP loan, the PPP loan you have outstanding, and the PPP loan you are about to get if you have not had one before. Allow our Accounting Firm in Columbia, MD to provide you the details.
Loan Proceeds Are Not Taxable
The COVID-related Tax Relief Act of 2020 reiterates that your PPP loan forgiveness amount is not taxable income to you. Do you need help with Tax Preparation in Columbia MD? We’re here to assist.
Expenses Paid with Forgiven Loan Money Are Tax-Deductible
As you may remember, the IRS took the position that expenses paid with PPP loan forgiveness monies were not deductible.
Lawmakers disagreed but were unable to get the IRS to change its position. The IRS essentially told lawmakers, “If you want the expenses paid with a PPP loan to be deductible, change the law.”
And that’s precisely what lawmakers did. The COVID-related Tax Relief Act of 2020 states that “no deduction shall be denied, no tax attribute shall be reduced, and no basis increase shall be denied, by reason of the exclusion from gross income.”
In plain English, the expenses paid with monies from a forgiven PPP loan are now tax-deductible, and this change goes back to March 27, 2020, the date the Coronavirus Aid, Relief, and Economic Security (CARES) Act was enacted.
A Columbia Maryland CPA can help you claim all the deductions and take the maximum benefit during the Tax Preparation season in Columbia MD. I’m a Small Business Accountant in Columbia MD that has helped many small businesses, individuals, medical practitioners and dentists get dental accounting services, tax preparation and bookkeeping services in Maryland.
The PPP loan that’s forgiven is not a loan. It’s tax-free money.
To have all or part of the loan forgiven, you had to spend the money on covered expenses. Under the new law, and retroactive to the inception of the original law, you can deduct the expenses that you pay with forgiven PPP monies.
The new law changes the treatment of EIDL advances that reduced the amount of your PPP loan forgiveness. First, for new loans, there is no reduction in forgiveness for the EIDL advance. Second, for prior loans that were forgiven and that suffered a reduction in forgiveness, the SBA is working on instructions that will tell the lenders to refund the EIDL advance money.
(If you are due one of the upcoming refunds, set up a receivable for this money so you don’t forget about it. If you need help with it, feel free to get in touch with our Accounting Firm In Maryland)
The new law adds four new categories of expenses that qualify as covered expenses for forgiveness:
- Operating expenditures
- Property damage costs
- Supplier costs
- Worker protection expenditures
But remember that to achieve 100 percent forgiveness, you must spend at least 60 percent of the loan on covered payroll costs. With 24 weeks at your disposal, you likely can spend the entire loan on payroll and not consider the other categories at all.
There’s much more to this, of course. If you would like a Tax Accountant’s help for your PPP loan or simply wish like to talk about other accounting and bookkeeping needs, please set up an appointment with a Business And Tax Accountant at: https://sigmataxes.acuityscheduling.com/schedule.php
Why Work With A Professional Accounting Firm In Columbia, MD?
There are many benefits of working with a skilled Small Business Accountant from Columbia MD. Some of the major ones are –
- Reliable and Dependable Service
- Skillful Mentorship
- Customized And Personalized Offerings
- Tax Saving
- 24×7 Availability Of Records And Documents
Sigma is the best CPA For Doctors in Maryland as well as small businesses in Columbia,MD. Learn more about Sigma Accountant and what sets us apart. Book your free consultation now