Unexpected Big Tax Bill Could Happen For Small Business Owners Who Got PPP Loans – CBS Dallas / Fort Worth

DALLAS (CBSDFW.COM) – Many small businesses may be forced to pay taxes on government loans designed to help them during the pandemic.

While Payment Protection Program loans are tax-exempt, a new IRS ruling states that businesses cannot deduct expenses paid with money from a PPP loan.

READ MORE: US to deport ‘massive’ number of Haitian migrants from Texas border town

This new ruling could impose a much larger tax bill on businesses that relied on these deductions than initially expected.

“That’s not what (the government) said at the end of March when these companies took out the loans,” said accountant Glen Birnbaum, partner at Sikich LLP. “They’re moving the goalposts.”

Under the new ruling, businesses that typically deduct payroll and rental charges from their taxes will not be able to do so for expenses paid for with PPP loan money.

This could make a company’s taxable income appear higher on paper.

New PPP ‘Need for a Loan’ Questionnaire Raises Concerns Among Small Business Owners

READ MORE: Plano police lieutenant dies due to complications from COVID-19

Tax experts say that a business that took out a $ 1 million PPP loan, without the deductibility, could owe between $ 300,000 and $ 400,000 more in taxes.

Birnbaum said many companies might not even be aware of this potential tax bill.

“Employers and businesses are tired because there is just a constant flow of advice from the IRS and following it all,” he said.

Members of Congress on both sides pushed for a bill that would allow small businesses to deduct costs covered by PPP loan funds.

Congress could vote on the bill in December.

Due to the uncertainty of their tax bill, economists say some companies may delay hiring as well as increases or end-of-year bonuses for employees until they have a better understanding of their situation. fiscal.

NO MORE NEWS: Governor Abbott signs $ 2 billion Texas border security bill in Fort Worth


About Shelly Evans

Check Also

Cannabis funding REIT AFC Gamma sets terms for $ 100 million IPO

AFC Gamma, a new commercial mortgage REIT focused on the cannabis industry, announced the terms …

Leave a Reply

Your email address will not be published.