I am guessing the forgiveness of the loan won’t be taxable. Despite what the thoughtful tax accountants say about this.

But right now, I wouldn’t worry too much about this. Hopefully we’ll get specific tax accounting instructions before tax returns need to filed.

For what it’s worth, if you record the forgiveness using a separate QuickBooks “other income” accounting like “PPP loan forgiveness,” that will flag the income for tax accounting purposes.

>Was I just interpreting the “necessary to support the ongoing operations” clause too strictly?

I think you were. The standard was not, for example, “absolutely necessary.” I said this in response to another question and comment… I think you consider the two pieces to this puzzle–the application and funding of the PPP loan and then the forgiveness of the loan separately.

Regarding getting the loan, the “standard” was basically “is the loan a good idea financially given the uncertainty?” Most businesses can honestly answer that question “yes.”

Regarding the forgiveness, the “standard” is basically “did you use the money to keep employees?” That’s a bookkeeping-type requirement.

What you seem to be suggesting–and by the way I agree with you–is that logically it would have made more sense to have some sort of hardship test for either the loan funding or at the very least the loan forgiveness.

One final comment: I think you not only did the right (morally correct) thing. I think you did the pragmatic thing. The chances someone actually got a PPP loan were pretty small, as we’re now seeing.

I wouldn’t do that. I understand your thinking. And it’s a good idea financially. But in my opinion, you do not want to confuse the bookkeeping in that way.

I keep saying this, but the banks and the SBA have done a pretty crummy job of figuring out the bookkeeping on this PPP loan stuff. Think about the personalized service you’ve gotten as part of the application process (which was easy part). And then think about how much personal attention you’ll get regarding the forgiveness accounting…

You have a partnership. The partnership should file a partnership return reporting the $6K-ish payments to you as guaranteed payments. Those guaranteed payments become your self-employment earnings and “count” as payroll costs.

on p. 5 there’s an explanation that would seem to indicate you can include the employees’ portion of the federal taxes.

Thanks.

Thanks! I did see the link that I think you are referring to for the US Treasury site, but the link no longer seems to be working. It just returns that I am not authorized to view that site. If you have the reference handy it would be greatly appreciated.

“Current economic uncertainty makes this loan request necessary to support the ongoing operations of the applicant.”

Even though we’ve been hit financially during this time due to the government Stay at Home order (paying employees who are working from home without a lot to do, paying rent on an office we can’t go to, Amazon orders that won’t ship for over a month so customers go elsewhere), I could not in good conscience certify that this loan is absolutely NECESSARY to support our ongoing operations. Is this a difficult time? Yes, but we have savings and can pay our costs during this time, so we can survive without this loan. I felt it better to leave the money for those small businesses that really need it.

However, it appears many, many businesses did not feel the same and have applied for and received PPP loans for businesses that were doing fine during this time and not in danger of closing. Was I just interpreting the “necessary to support the ongoing operations” clause too strictly? I didn’t think so, but it seems like these other healthy businesses are getting “free” money intended for small businesses that desperately need it.

Instead of a PPP loan, I was considering using the Employee Retention Credit. The terms require a full or partial suspension of your business due to government limits on commerce during this time (which we’ve had in WA) and don’t require me to certify the funds are necessary to support ongoing operations. It seems less stringent compared to the PPP “necessary to continue operations” clause. Since we have fewer than 100 employees, it’s okay if my employees continue to do limited work from home.

Hi Steve,

I started a retail LLC established in July of 2019. ( I was employed full time by the state for a year and quit in October 2019 to start my business )

There are two 50% owners . Me (who does the day to day business activity ) and my partner ( investor with rights to day to activity )..

He has paid Me 6k average a month by transferring funds from his personal account to my personal account . We did not use quick books of any accounting and I did not report or pay taxes. Therefore we do not have payroll.

I also have not filed my taxes yet .

I do not know how to prove it.

What do I need to do to be eligible for the PPP loan ?

What do I apply under ? Sole Proprietor?