It’s safe to say most of us are ready for this unprecedented year to come to an end! Before it does, however, there is one more thing many small business owners need to be mindful of, and that’s crafting a sound plan to navigate the loan forgiveness process of the Payroll Protection Program (PPP).
If you’ve already used all of your loan funds, you’re probably ready to get this whole thing behind you, particularly if your covered period is over. However, there are some important things to keep in mind that could change your plans on when to submit your application, including the potential for significant tax savings if you’re willing to wait just a little longer.
Should you wait? Well, a tiny bit of patience and some smart planning can go a long way, so here are a few things to keep in mind when you talk to your accountant or tax professional:
- If you’re ready to turn in your application, know that your lender may not be ready for it. There is still a lot of gray area here, so many lenders are waiting on additional guidance from the Small Business Administration (SBA) and U.S. Department of the Treasury before finalizing their forgiveness processes.
- Congress is considering legislation that would simplify the application process for small businesses who have a PPP loan of $150,000 or less. Should it pass, many small businesses would have an easier pathway to getting their loans forgiven.
- There’s some uncertainty around whether or not Congress would pass anything that would override the IRS’s position that a deduction is not allowed for an expense if the payment of the expense results in forgiveness of a PPP loan. As such, use this as an opportunity to implement some tax planning strategies before the end of the year.
- Waiting allows you to get past any learning curves and system kinks, while also giving you the chance to see if any new guidance is issued.
- However, if you’re planning on doing any changes to your business structure or ownership in the near future, it might be better to file now rather than to wait.
- There’s a lot to do in the meantime! Documentation is critical – for both the items that have to be submitted, and those required to be maintained. Use this waiting time to get ready to file your application.
Through it all, Padgett is here to support you with whatever you might need during this process. As trusted tax professionals and small business advisors, we pledge to give you the best recommendation to fit your needs, and then help you craft a tax plan that suits you. If you need help with the PPP loan forgiveness process, don’t hesitate to reach out to one of our offices today.