New Reporting Requirement for PPP Loan Forgiveness

Since these loans and grants are nontaxable for federal purposes, you won’t typically enter them as income for federal forms such as Schedule C, Schedule E, or Schedule F. However, you may be required to make state adjustments to income or expenses based on the funds received and what they were used for. The Paycheck Protection Program (“PPP”) https://kelleysbookkeeping.com/ created under the CARES Act provided much needed economic relief to businesses and other organizations negatively impacted by the COVID-19 pandemic. One of the biggest benefits of the PPP is the ability of taxpayers to treat the loan forgiveness as tax-exempt income to the extent the loan proceeds were used for eligible expenses.

Our NFT Playbook is a roadmap to addressing IP rights, business infrastructure and risk for media & entertainment companies and others. Withum’s National Tax Policy Resource Center is a one-stop-shop for timely insights and upcoming webinars to keep you apprised of the latest tax developments. The maximum amount of a second PPP Loan (not to exceed $2 million in any case) is either 2.5 (3.5 for food service establishment and restaurants) times the average monthly payroll for the last twelve months through the application date, or the average 2019 monthly payroll.

To generate a PPP forgiveness statement:

Forgiven PPP loans are considered «Other Tax Exempt Income» for federal purposes and will be reported on Schedule K-1 box 16B (S-corporations) or 18B . The tax year in which tax-exempt income was originally reported, the amount of tax-exempt income that was originally reported in that tax year, and the amount of tax-exempt income being adjusted on the amended return. Certain borrowers will find that the new Act has simplified obtaining forgiveness of their PPP Loans. The new Act allows 24 days after enactment for the SBA to create a one-page certification form for borrowers with a PPP Loan less than $150,000. Using that form, borrowers certify their compliance with the loan requirements and provide certain required information.

For questions or further information relating to taxation under the CARES Act and the new relief bill, please contact Attorney Britany E. Morrison. Subsequently, either the whole or part of the forgiveness request is denied, or the taxpayer does not actually request forgiveness of the PPP loan. The Tennessee Society of Certified Public Accountants is the state professional organization for certified public accountants in Tennessee. With more than 100 years of service to the accounting profession, TSCPA acts on behalf of its members and provides support, Further Guidance Issued On Tax Treatment Of Ppp Loan Forgiveness enabling its members to perform quality professional services while serving the public interest. In accordance with changes signed into law in June of 2022, a larger business registrant will be required to use electronic means to file returns and remit taxes to the State of Rhode Island for tax periods beginning on or after January 1, 2023. The PPP loan program was established by the Coronavirus Aid, Relief and Economic Security Act to assist small US businesses that were adversely affected by the COVID-19 pandemic in paying certain expenses.

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In this context, the PPP program was originally created under the CARES Act and later clarified by the CAA, as Section 276 of the CAA excluded forgiven loans from gross income and authorized the deduction of certain business expenses required to be paid through the PPP loan. Likewise, business expenses paid for by PPP loans that are deductible at the federal level remain deductible in computing the Michigan tax base under the IIT and CIT. In other words, the Michigan tax base for both individuals and corporations using the IRC in effect for the tax year fully conforms to the federal income tax treatment of PPP loans. Some states are taking affirmative steps to address these issues in legislation and guidance.