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Daycare and Taxes>Question for Tom Regarding the Forgiveness of a Paycheck Protection Loan
MyAngels 08:12 PM 05-11-2020
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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AmyKidsCo 12:48 PM 05-12-2020
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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MyAngels 12:54 PM 05-12-2020
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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sahm1225 03:00 AM 05-13-2020
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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MyAngels 05:20 AM 05-13-2020
Originally Posted by sahm1225:
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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TomCopeland 02:38 PM 05-13-2020
Originally Posted by MyAngels:
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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TomCopeland 02:36 PM 05-13-2020
Originally Posted by MyAngels:
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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AmyKidsCo 01:34 PM 05-14-2020
Originally Posted by TomCopeland:
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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TomCopeland 02:51 PM 05-14-2020
Originally Posted by AmyKidsCo:
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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284878 04:10 PM 05-14-2020
Originally Posted by TomCopeland:
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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TomCopeland 09:42 AM 05-15-2020
Originally Posted by 284878:
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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Tags:coronavirus - stimulus, covid-19, government subsidies, ppp, tom copeland
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