Tax Season Alert! Current PPP Loan Recipients May Need to Take Immediate Action
This is a tax season unlike any other in recent years. If you are a taxpayer who accepted and received a PPP loan in 2020, you will need to pay close attention and evaluate your specific situation before filing your taxes this year.
On December 27th, the President signed into law the Consolidation Appropriations Act. What does this mean? It means that employers who accepted a Paycheck Protection Program (PPP) loan in 2020 can now also claim the Employees Retention Credit (ERC). Also, in the case of taxpayers who did not already receive the PPP forgiveness ruling by Dec. 27th, 2020, then it expands the types of expenses for which taxpayers may receive forgiveness.
These changes were made after the fact to reflect as if they were part of the original program initially. Therefore, taxpayers are now able to claim the Employee Retention Credit for 2020.
What is the Employee Retention Credit (ERC) and how does it apply to you?
Under the Consolidated Appropriations Act, 2021, the employee retention credit, a provision of the CARES Act, is available through June 30, 2021, to eligible employers who retained employees during the COVID-19 pandemic. It is meant to help businesses offset the financial disruption caused by the pandemic. --Source. Sure Payroll website.
FOR FURTHER IN-DEPTH DETAILS ABOUT THE ERC, PLEASE READ THIS ARTICLE.
IMPORTANT NOTICE FOR TAXPAYERS: The primary limitation on the ability to claim both benefits is that a taxpayer may not receive PPP forgiveness with respect to “qualified wages are taken into account” in claiming the ERC. As a result, taxpayers with a PPP loan will want to carefully evaluate and select the expenses and individual wage payments used to apply for PPP forgiveness. In some situations, failure to do so might result in permanently forgone tax credits.
--Source. DHG website.
If you have applied for and been approved for a PPP loan but yet have not received the payment, it is highly suggested that you contact your bank institution to discuss the status of the application and the request to submit a revised application after consulting with their tax advisor.
--Source. DHG website.
If your bank is still processing your application to the Small Business Administration (SBA), and you send a request to revise the application, your bank may be able to delay and allow your changes to the application itself. If you are uncertain what to do, seek further assistance from us at Peridot Consulting or any other tax advisor. Additional information and guidance may be required by the SBA.
Please contact us at Peridot with any further questions regarding your individual or business standing. email@example.com