PPP (Paycheck Protection Program) loans have been extremely helpful for companies in need. During these times, there have been many business that have sought out to apply for these loans. If your business or a business you are familiar with took out a loan this year, tax season might present a big surprise in the form of high taxable income rates.
What businesses should know is that the expenses used to apply any loans loans are nondeductible. This is frightening because the income rates that can come from this could end up costing you more than the previous year, even if you're annual income is the same.
We are seeing pushback from legislators as well as accountants on this dilemma. Businesses that are struggling would not be able to afford being blindsided by a tax bill that is larger than expected. It is difficult for a business to budget for expenses when they cannot predict what is to come. However, there is reassuring news on the horizon in the form of a $908 billion tax stimulus proposal.
Part of this proposal is to make these nondeductible expenses deductible so that these struggling businesses can aim to prosper rather than fall during times when it seems easy to fail. This is something that Congress will need to pass if struggling businesses are going to have a chance to stay afloat.
Marks, G. (2020, December 06). Watch out for the paycheck protection program's tax sting in the tail | Gene Marks. Retrieved December 11, 2020, from https://www.theguardian.com/business/2020/dec/06/paycheck-protection-programs-sting-in-the-tail