Coronavirus has certainly made its mark on business, so it’s no surprise that income taxes coming due April 15 will have some new wrinkles. Many of these involve loans or other financial support related to individuals or businesses hurt by the pandemic.
Michael Schneider and David Campos of ATBS, the nation’s largest financial services provider for owner-operator truckers, as well as a few other experts, offer the following insights on COVID-19-related tax matters.
PPP LOANS. Questions still remain over conversion of Paycheck Protection Program loans to grants and how that’s counted as income. One sticking point is that while Congress designated PPP loans as tax-free and not to be considered as income, the IRS has a rebuttal: The tax code says if ordinarily deductible business expenses were purchased with tax-free money, those expenses are not deductible. Missing out on the deductions means higher taxable income.
Pending legislation in the Senate (S.3612) and the House (H.R.6821) would resolve the issue. The measures “will ensure the receipt and forgiveness of PPP assistance does not result in an unexpected and burdensome tax cost,” says a statement from the American Institute of CPAs (AICPA).
For now, there’s not much for PPP recipients to do before year-end other than what, ideally, they’ve been doing all along: keeping good records of how PPP money was spent, especially with respect to payroll. It might well affect not only your tax bill, but whether you pay back your loan with interest or whether you can keep the money and run.
ATBS President Todd Amen said most client loans ATBS has assisted with were between $8,000 and $12,000.
PPP AND OBAMACARE. This gets complicated due to the “unexpected colliding” of PPP and ACA, Schneider said. During open enrollment each year, Affordable Care Act applicants are asked to estimate their income for the coming year. A year ago there was no idea that COVID would initially hamstring the economy or that PPP money would be issued as a result.
