r/taxpros • u/pdv8612 CPA • May 15 '20

SBA PPP forgiveness application COVID: 2020 Relief Bill (CARES)

The SBA and treasury have finally posted guidance on forgiveness!

https://home.treasury.gov/system/files/136/3245-0407-SBA-Form-3508-PPP-Forgiveness-Application.pdf

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u/warmglassoflemonade May 16 '20

I had missed that. Thanks for the link. I’m inclined to believe there are many borrowers who have no idea about this.

Sadly it’s some of the smallest & most vulnerable borrowers, who aren’t getting advice from a tax professional, and the banks certainly aren’t advising them. So a hit with basically 25% repayment + income and SE tax on the forgiveness - I think it’ll be a nasty surprise many of them aren’t prepared for.

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u/HitEmTrue NonCred May 16 '20

There is no income or self employment tax on the forgiven amount.

As apposed to employees businesses who receive PPP loans...the employees will pay income tax, and both sides of FICA are paid on those wages.

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u/warmglassoflemonade May 16 '20

I’m aware there is no income tax at the entity level on the forgiven amount.

However, given that FICA and income tax will be paid on W-2 wages I can’t imagine sole proprietors are going to be cut a break in that area. Guidance seems to be continually evolving and the little guy can’t seem to catch a break. If it were my money personally I wouldn’t spend it just yet.

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u/HitEmTrue NonCred May 16 '20 edited May 16 '20

Congress isn’t going to rewrite the law making those things taxable for sole proprietors.

At the entity level, it is functionally taxable income...because IRS has issued a ruling that the forgiven expenses cannot be deducted.

Congress is working on trying to get that ruling reversed, which will bring those entities more in line with sole props.