Paycheck Protection Program questions and answers near the end of 2020
Guidance for PPP loan forgiveness and accounting continues to evolve
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Although there were relatively few legislative developments involving the Paycheck Protection Program (PPP) in late summer and early fall, Small Business Administration guidance continued to address tax and accounting issues regarding the relief loans and forgiveness of them, as many borrowers neared the end of the 24-week covered period.
The evolving guidance has, in some cases, led to more questions. RSM leaders discussed those pressing issues during a 30-minute Q&A session on Nov. 12 as part of RSM Tax Summit Week 2020. You can watch video of the whole session below.
Ryan Corcoran, RSM Washington National Tax senior manager and PPP specialist, discussed tax-related issues and options for borrowers that spent their PPP loan in 2020 but will not have their loan forgiven until 2021.
“We’re hearing that the IRS is really looking at this and may yet issue some guidance,” Corcoran said. “Discuss with your tax advisor and get an idea about the risk of each option and make an informed decision according to your risk profile and objectives. There is flexibility and uncertainty out there. PPP has been a great program, but it’s so novel that a lot of guidance is coming out in real time.”
On the accounting side, Faye Miller, RSM partner and national accounting leader, discussed the challenges of recognizing the earnings impact of a PPP loan on financial statements prior to forgiveness.
“The SBA has indicated they’re going to audit anyone who, along with their affiliates, received $2 million or more in proceeds,” Miller said. “That audit, in conjunction with their determination of whether or not the borrower really needed the loan, is so subjective. There’s a lot of uncertainty about what exactly will they be looking for and how are they going to come down on these subjective matters.”
The SBA’s Paycheck Protection Program has exhausted the first $350 billion tranche in aid provided by Congress and the Trump administration.
Federal contractors who participate, or have subcontractors who participate, in the PPP must consider what the funds mean to them.
The Coronavirus Aid, Relief and Economic Security (CARES) Act provides options for small and midsize businesses facing liquidity challenges.
A guide to the various pieces of COVID-19-related legislation the federal government has passed to provide aid to businesses.