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  #1  
Old 05-11-2020, 09:12 PM
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Default Question for Tom Regarding the Forgiveness of a Paycheck Protection Loan

My bank finally got back with me on the Paycheck Protection Loan, and I'm weighing my options between that and unemployment.

I've read in a couple of places now that the forgivable amount as it pertains to self-employed owner compensation is limited to 8/52 of 2019 net profit. I've also read that if it's used for allowable expenses they need to be deductible on Schedule C. Does that mean that the expenses we claim on 8829 would not be able to be forgiven?

At the end of this I just don't want to end up with a loan that's not going to be forgiven.

One other thing - do you know if this loan will be considered taxable income?

Thanks for your help!
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Old 05-12-2020, 01:48 PM
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I'm not Tom, but I talked to my bank about it this past Friday.

I specifically asked about proving how it was spent - spreadsheet or dedicated account or what to show how much was used on utilities, how much on payroll, etc. She said I could disburse it all as payroll then use it however I wanted. She also said the bank would contact me in 6-8 weeks so I should plan to have it all disbursed in about 6 weeks. And that working with the government was like "trying to hit a moving target."

My plan is to disburse half to myself this month as "May payroll" and the other half next month as "June payroll."

Unless Tom Copeland says I should do it differently...
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Old 05-12-2020, 01:54 PM
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That's what I had planned to do as well, but with the 8/52 figure, that means the entire amount can't be used as payroll and then 100% forgiven. Apparently the rules are somewhat vague, but I've seen this number (8/52) in several places now.
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Old 05-13-2020, 04:00 AM
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My angel - do you follow tom on Facebook, he answers there faster.

My understanding for the PPP was that You have to use 75% for payroll and 25% can be utilities and mortgage interest. So multiply your amount by 75% and divide by 8 and that’s your weekly amount To report to Unemployment. You might still be able to get PÚA if the Weekly amount is low
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Old 05-13-2020, 06:20 AM
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Quote:
Originally Posted by sahm1225 View Post
My angel - do you follow tom on Facebook, he answers there faster.

My understanding for the PPP was that You have to use 75% for payroll and 25% can be utilities and mortgage interest. So multiply your amount by 75% and divide by 8 and that’s your weekly amount To report to Unemployment. You might still be able to get PÚA if the Weekly amount is low
I'll have to go over there and ask him, thanks! I read somewhere from Tom that you could divide the proceeds by 8 and then just pay yourself that amount, but what I'm reading says that if you do that the whole amount won't be forgiven. I'm still waiting on confirmation on PUA, but it looks like I'll make more with unemployment than I will with the PPP, so I'll probably be turning down this loan after all.
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Old 05-13-2020, 03:36 PM
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Originally Posted by MyAngels View Post
My bank finally got back with me on the Paycheck Protection Loan, and I'm weighing my options between that and unemployment.

I've read in a couple of places now that the forgivable amount as it pertains to self-employed owner compensation is limited to 8/52 of 2019 net profit. I've also read that if it's used for allowable expenses they need to be deductible on Schedule C. Does that mean that the expenses we claim on 8829 would not be able to be forgiven?

At the end of this I just don't want to end up with a loan that's not going to be forgiven.

One other thing - do you know if this loan will be considered taxable income?

Thanks for your help!
The forgivable part of the PPP loan is your profit from your 2019 Schedule C (line 31) divided by 12 = your average monthly profit x 2.5. So, if your annual profit was $36,000, your average monthly profit was $3,000 x 2.5 = $7,500 the maximum you can get from the PPP. 75% of this must be spent on payroll. If you have staff you can them. You can also pay yourself. You can write yourself a check each week representing your average profit. The other 25% can only be spent on utilities (gas, electric, water, Internet), mortgage loan interest/rent and credit card/car loan interest. You can't spend it on anything else for it to be forgivable.
The PPP forgivable loan is not taxable income! Money spent with PPP money cannot be deducted on your 2020 tax return.
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Old 05-13-2020, 03:38 PM
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Default PPP and unemplloyment

Quote:
Originally Posted by MyAngels View Post
I'll have to go over there and ask him, thanks! I read somewhere from Tom that you could divide the proceeds by 8 and then just pay yourself that amount, but what I'm reading says that if you do that the whole amount won't be forgiven. I'm still waiting on confirmation on PUA, but it looks like I'll make more with unemployment than I will with the PPP, so I'll probably be turning down this loan after all.
See my article about whether you are better off with the PPP or unemployment: http://tomcopelandblog.com/apply-for...day-april-27th
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Old 05-14-2020, 02:34 PM
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Quote:
Originally Posted by TomCopeland View Post
The forgivable part of the PPP loan is your profit from your 2019 Schedule C (line 31) divided by 12 = your average monthly profit x 2.5. So, if your annual profit was $36,000, your average monthly profit was $3,000 x 2.5 = $7,500 the maximum you can get from the PPP. 75% of this must be spent on payroll. If you have staff you can them. You can also pay yourself. You can write yourself a check each week representing your average profit. The other 25% can only be spent on utilities (gas, electric, water, Internet), mortgage loan interest/rent and credit card/car loan interest. You can't spend it on anything else for it to be forgivable.
The PPP forgivable loan is not taxable income! Money spent with PPP money cannot be deducted on your 2020 tax return.
Is it at least or up to 75% must be spent on payroll? Because the way my bank person phrased it, it sounded like 100% could be spent on payroll. Also, she said to make sure it was disbursed within 6 weeks if possible, which would mean I'd be eligible for PUA sooner, right? Or would I have to claim it as income for the full 8 weeks? SO many questions!
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Old 05-14-2020, 03:51 PM
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Originally Posted by AmyKidsCo View Post
Is it at least or up to 75% must be spent on payroll? Because the way my bank person phrased it, it sounded like 100% could be spent on payroll. Also, she said to make sure it was disbursed within 6 weeks if possible, which would mean I'd be eligible for PUA sooner, right? Or would I have to claim it as income for the full 8 weeks? SO many questions!
You must spend at least 75% on payroll. I believe you must divide the full amount over 8 weeks and report this weekly when filing for unemployment.
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Old 05-14-2020, 05:10 PM
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Quote:
Originally Posted by TomCopeland View Post
You must spend at least 75% on payroll. I believe you must divide the full amount over 8 weeks and report this weekly when filing for unemployment.
So just to confirm, I can use all of it for payroll. Do I claim wage increase?
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  #11  
Old 05-15-2020, 10:42 AM
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So just to confirm, I can use all of it for payroll. Do I claim wage increase?
I don't believe you can use it all for your payroll, but you can probably use it all for payroll if you have employees. You can't give a wage increase to yourself or employees.
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Old 05-16-2020, 07:35 AM
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Originally Posted by TomCopeland View Post
I don't believe you can use it all for your payroll, but you can probably use it all for payroll if you have employees. You can't give a wage increase to yourself or employees.
Why not?

The ppp loan was based off my 2019 schedule C not my current income/expenses report.

Last year I was running with one pt family until May. In May I added more pt families but it was not until August that I filled up. I ran full until Mar when the virus hit.

So based on last year taxes I was supposed receive $922 but I only received $900. However based on this year first quarter, ($679 weekly minus expense) it would be roughly $200 weekly vs $90.

So I already received a wage increase since August last year but it was not reflected in the amount I received.

Why wouldn't I be able to claim wages of $112.50 vs $90?
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  #13  
Old 05-16-2020, 09:59 AM
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This blog post explains it in pretty clear language for anyone wanting clarification on this:

https://bench.co/blog/operations/ppp...rs-sole-props/
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