Will You Owe Taxes on Your Paycheck Protection Loan?
Paycheck Protection Program (PPP) loans have been a top option for businesses struggling due to COVID-19, but the tax obligations associated with them have been challenging to track and understand.
By: Sean Ludwig, Contributor
As of 5/5/21 the PPP loan program has run out of funds and is no longer accepting applications. Some community lending institutions are still accepting applications from minority-owned and women-owned businesses and businesses in underserved communities to continue to disseminate funding earmarked for that purpose. For more on stimulus aid still available, see our main story here.
One of the most considerable ways the U.S. government has provided aid to small businesses during the COVID-19 pandemic has been through Paycheck Protection Program (PPP) loans. More than $500 billion in these loans were distributed in 2020 alone, making PPP an enormously popular choice for small businesses hoping to recover.
While the PPP has been helpful for businesses, the tax implications associated with these loans have proved to be confusing for many business owners. After the Coronavirus Aid, Relief, and Economic Security (CARES) Act passed in , the Small Business Administration (SBA) issued guidance that changed several times. Then the rules around PPP and taxes changed again in with the passage of the Coronavirus Response and Relief Supplemental Appropriations Act (CRRSAA) of 2021.
How does the PPP loan program work?
The PPP emergency loan program, part of the CARES Act, has been authorized to distribute hundreds of billions in forgivable loans to small businesses. The program initially had $350 billion allocated in March and another $320 billion authorized in , Congress provided another $284 billion for new and “second-draw” PPP loans for businesses. (meer…)