Comments on: Covid-19 Economic Uncertainty Update

By: Economic Optimist

Economic Optimist — Thu, 28 Jan 2021 20:46:55 +0000

I think you hit on some really good points about the impacts of Covid on economic certainty (or lack thereof). It’s hard to make plans as a small business when you’re not sure what the future holds, but there’s always some hope to hold onto.

By: Stephen Nelson CPA

Stephen Nelson CPA — Sat, 23 Jan 2021 19:07:24 +0000

In reply to Gidget. The wages paid to the owner count as payroll that plugs into the PPP formula. Not a loan repayment.

By: Stephen Nelson CPA

Stephen Nelson CPA — Sat, 23 Jan 2021 19:06:18 +0000

In reply to Morgen.

Good question. And I’ve suggested people collect documentation from sources dated around the time they apply that support the uncertainty position.

Also remember that if borrower’s loan small-ish, there’s sort of an automatic presumption of economic uncertainty. We’ve talked about that before. It applied to first first draw loans. And maybe to the newest wave of PPP loans too.

By: Morgen

Morgen — Sat, 23 Jan 2021 04:17:57 +0000

In reply to Stephen Nelson CPA. I guess the question is: If someone is eventually audited, how do they prove you were NOT uncertain? And even if they do, is there actually an established penalty? SIGH.

By: Gidget

Gidget — Sat, 23 Jan 2021 03:04:37 +0000

In reply to Stephen Nelson CPA. Re PPP. If you have a C Corp. The company grossed 120,000. Expenses were $37,000 plus $20,000 paid to owner. The profit of $63,000 was also paid to the owner for a previous years loan from the owners personal account. Am I using $20,000 or $83,000 as my income?

By: Stephen Nelson CPA

Stephen Nelson CPA — Thu, 21 Jan 2021 22:49:27 +0000

In reply to Morgan. I agree with you Morgan that just because you make the 25 percent reduction formula work, the economic uncertainty requirement should still apply. I also assume folks will be able to see who applies and the details. As for first draw loans. And you wonder if there isn't some downside to advertising you've been beat up. I mean, I guess people will know that's happening to some folks. Restaurants, for one. But I'm not sure you want your competitors to know you're down.

By: Gary Haber

Gary Haber — Thu, 21 Jan 2021 22:25:51 +0000

I can’t comment since I haven’t heard or seen it yet.

By: Morgan

Morgan — Thu, 21 Jan 2021 21:54:53 +0000

I’m in one of the areas that is still severely restricted (portland, or) so it’s an easy proof for me that my small business is heavily affected. My client hrs are down more than 50% at this point and there is no sign of small business recovery here, which is what I would need to increase billable hours. I’d worry more about it if I lived in an area that is ‘open’ for business though. It would be an awfully hard thing to try to prove under audit, one way or the other. 😛

Having said that, I have several clients that are technically able to apply, (invoices bunched in alternate quarters rather than spread evenly through the year provide an exaggerated drop over quarters) and are doing so but it worries me. If you apply for a second PPP… but have record breaking profits in both 2020 and 2021 it seems like something would flag that for audit, at least on the second draws.

I don’t know. Right now it just feels like a free for all. Or a buy-now-pay-later for all.

By: Stephen Nelson CPA

Stephen Nelson CPA — Thu, 21 Jan 2021 20:59:06 +0000

In reply to VG Bullard. :-)

By: VG Bullard

VG Bullard — Thu, 21 Jan 2021 20:50:05 +0000

In reply to Stephen Nelson CPA. All good comments. Thanks for your thoughtful insight.