SMALL BUSINESSES AND THE PPP PROGRAM
Small businesses and the PPP program. A recent IRS ruling tying up a loose end in the 2020 economic relief law could force many small businesses to pay taxes on government aid meant to help through the pandemic. The agency on November 18th said the businesses cannot deduct expenses, such as payroll and rent, paid for with money from the Paycheck Protection Program of the CARES Act. Such deductions are common when those expenses are paid for with revenue from running a business. The ruling hardened a divide between the Trump administration and the main tax writers in Congress, who have sought since the coronavirus outbreak produced an economic slowdown to ensure that aid to businesses not be taxed. The IRS decision got lost in the swirl of news out of Washington last week , including that the Treasury Department moved to restrict the Federal Reserve’s emergency lending. Treasury Secretary Steven Mnuchin opposed PPP related deductions for businesses in negotiations with Congress earlier this year. Small businesses and the PPP program.
As word sank in this week, accountants and bankers called small business owners to warn them to prepare for an increased tax bill. A trade association of accountants urged business owners to reach out to members of Congress for legislative relief. Leaders of the tax writing Senate Finance Committee, Chuck Grassley, an Iowa Republican, and Ron Wyden, an Oregon Democrat, asked the IRS and Treasury to reconsider their position and said Congress may act when it reconvenes in December. “Since the CARES Act, we’ve stressed that our intent was for small business receiving Paycheck Protection Program loans to receive the benefit of their deductions for ordinary and necessary business expenses,” the senators said in a statement.
To speed the distribution of $525 billion in aid to small businesses this spring and summer, the CARES Act directed the Small Business Administration to move funds through the nation’s banks in the form of loans that would be forgiven if a business showed it used the money to keep people employed. The last loans were distributed in August.