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PILLA TALKS TAXES - Featured Article(s)
_________________________________________ 

From July 2020 issue - Important Updates

THE PAYCHECK PROTECTION PROGRAM FLEXIBILITY ACT OF 2020
New Changes Provide More Options

 

 

On Friday June 5, President Trump signed H.R. 7010, titled the Paycheck Protection Program Flexibility Act (the Flexibility Act). See: Public Law 116-132, June 5, 2020. The act adds considerable flexibility to small businesses with PPP loans. There are seven major aspects to the Act which I discuss in turn*. 

1. Increased maturity date.

2. Extended time period for use of loan proceeds.

3. Reduction in percentage dedicated to payroll.

4. Safe-harbor when employers can’t maintain prior employment levels.

5. Extension of payment deferral period.

6. Payroll tax deferral.

7. Application deadline.

 

*Although the full article is discussed in the July 2020 issue of Pilla Talks Taxes,we wanted to make sure you were aware of the seven aspects above.  Subscribers to Dan's electronic newsletter can get the full discussion of each point when they log in and download their copy. Single issues of the newsletter are available for $15.95 per download, contact our office to order single issues.

 


IS FREE MONEY EVER FREE?

 Beware of Audit Risks Related to PPP Loans 

 

Millions of businesses scrambled to obtain Paycheck Protection Loans (PPP) from the government during April and May. Millions more will continue to seek such loans as Congress makes more funds available under the program.

 As we know, PPP loan are “forgivable” if “current economic uncertainty” makes the loan necessary to continue business operations. We also know that PPP loan proceeds must be used for a very narrow scope of expenses as set out in the lead article of this issue. If a business uses the proceeds as required (with at least 75% going to payroll costs) the loan is forgiven. That is to say, you don’t have to pay it back. It’s free money from the government—a giveaway; largess. 

But nothing from the government is ever free. In the case of PPP loans, taking the money opens businesses up to potential audits—on at least two accounts. 

The first audit scenario addresses whether the loan was “necessary” to continue business operations. The “necessary” element must be certified on the loan application and is subject to government scrutiny. I expect the SBA to inquire of the business whether the loan was indeed necessary to continue operations. In some cases, such as restaurants or other service industries closed by government “stay-at-home” orders, this should not be a significant challenge. 

Other businesses that continued to operate will have to show that the money was necessary. There’s no statutory guideline or instructions from the SBA as to exactly what constitutes necessity in this regard. Certainly it will be a facts and circumstances test based on the totality of factors relevant to your situation. At the core is the extent to which the business revenue dropped in 2020 compared to the corresponding quarters of 2020. For example, if your second quarter 2020 revenue is half of what it was in 2019 (with all other factors being equal) it will be hard to say that a PPP was not “necessary” to continue business operations. 

On the other hand, if yours is a personal services business specializing in the home delivery of groceries and other personal items, your business might be flourishing in 2020. If your revenue is up expressly because of COVID-19-related factors, it will very hard to say you need the money to continue business operations. 

The second, and frankly more likely, audit scenario will be the government’s efforts to verify that loan proceeds were in fact used as required by law. Both the statute and the PPP loan application are very specific about how the proceeds must be used. The applicant signs a declaration on the PPP loan application saying the money will be used as required. Likewise, the loan forgiveness application (discussed in detail next month) also contains such a declaration, and the application process requires the production of supporting documents to prove the case. 

I expect this to be scrutinized heavily. If you took or plan to seek a PPP loan, be absolutely certain that you, a) use the money only as authorized by law, and b) you can prove it. 

The burden will be on you to prove you did it right; the government will not be required to prove you did it wrong. If you’re unsure about any element of PPP, make sure you consult competent counsel before proceeding. 

 

The above is  an article from the June 2020 issue of Pilla Talks Taxes Newsletter. Subscribers to Pilla Talks Taxes are able to read complete articles as well as the rest of the newsletter when they log into their subscription account on their non mobile device. https://taxhelponline.com/subscriber-login.html


For more on how extending your filing and payment options on your 2019 taxes, check out my video: 

URGENT! IRS EXTENDS APRIL 15th DEADLINE! 

JULY 15th is approching quickly!

    

LOOKING TO STAY CURRENT ON THE LATEST TAX CHANGES?

Dan Pilla' monthly newsletter, Pilla Talks Taxes, features news stories and developments in federal taxes that effect your pocket book. Each information packed issue shows you how to use little known strategies to cut your taxes, protect yourself from the IRS, exercise important taxpayers' rights and keeps you up to date on the latest trends in Washington on the important subjects of taxes and your rights. You can't afford to miss a single issue!

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ARTICLES FOUND IN THE LATEST 

PILLA TALKS TAXES ISSUES:


June 2020 

 

PPP LOANS AND THE PAYMENT
OF BUSINESS EXPENSES

Are They Tax Deductible?

CONGRESSIONAL ACTION ON PPP EXPECTED

Numerous Bills Are Afloat

WHY NOT A PAYROLL TAX CUT?

Lower Employment Taxes Encourages Hiring

FIVE CRITICAL THINGS TO
KNOW ABOUT PPP LOANS

Seeking Clarification in the
COVID-19 Storm

By Christy Lee, Attorney at Law

IS FREE MONEY EVER FREE?

Beware of Audit Risks Related
to PPP Loans

NEW EMAIL REFUND SCAM

Fraudsters Target Stimulus Payments

COVID-19 Is the
Tax Increasers’ Best Ally

By Dr. Merrill Matthews


July 2020 

 

THE
PAYCHECK PROTECTION PROGRAM FLEXIBILITY ACT OF 2020

      New Changes Provide More Options

 

PAYING FOR THE PAYCHECK
PROTECTION PROGRAM

     “Pay-As-You-Go” Does Not Apply

 

WHAT HAS COVID COST
THE FEDERAL GOVERNMENT?

     The Numbers are Staggering

 

LETTER FROM
CONGRESSIONAL BUDGET OFFICE

     Budgetary Effects of the
2020 Coronavirus Pandemic

 

 

 

Missed a prior featured article?

Here are links to some of the favorites:

FIVE THINGS EVERY CITIZEN
NEEDS TO KNOW ABOUT IRS CONTACTS

 

LEVY OF SOCIAL SECURITY BENEFITS

 

HOW LONG DO I KEEP TAX RECORDS?

 

CHANGE IN POLICY ON
ENFORCEMENT OF STRUCTURING LAW

Laws Pertaining to Moving Your Money
from Account to Account

 

WHAT EVERY CITIZEN NEEDS TO KNOW 
ABOUT RETIREMENT FUND DISTRIBUTIONS

The Tax Consequences of Taking Your 401(k) or IRA  

 

"I'M FROM THE IRS... -And You're Going to Jail!"

 

PASSPORTS AND THE IRS
  They Have More in Common Than You Might Think

 

END OF THE YEAR TAX PLANNING
  9 Simple Steps That Can Cut Taxes and Pain

  



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