Law Talk with the Flock

Will I Be Taxed On My PPP Loans?

January 20, 2021 Jeana Goosmann, Aaron Adams Season 2 Episode 1
Law Talk with the Flock
Will I Be Taxed On My PPP Loans?
Show Notes Transcript

Goosmann Law Firm's Omaha Business and Banking Attorney Aaron Adams and Host Jeana Goosmann discuss the PPP loans from 2020 and what they mean for you and your taxes. 

  1. Do people need to pay taxes on these loans? 
  2. Loan Forgiveness involving the PPP loans
  3. How Goosmann Law Firm can help business leaders navigate these complex matters 

Become a flock fan and subscribe to our Podcast for weekly episodes! Learn more at www.goosmannlaw.com.

DISCLAIMER: The information in this podcast episode “episode” is provided for general informational purposes only and may not reflect the current law in your jurisdiction. By listening to our episode, you understand that there is no attorney client relationship between you and the Goosmann Law Firm “GLF” attorneys and podcast publisher. No information contained in this episode should be construed as legal advice from GLF or the individual author, hosts, or guests, nor is it intended to be a substitute for legal counsel on any subject matter. Please read our full Podcast Disclaimer.

Goosmann Law Firm:

Do complex legal issues hold you back? Let's get energized and bring clarity to your top legal questions. This is Law Talk With The Flock by Goosmann Law Firm.

Jeana Goosmann:

Hello, I'm your host, Jeana Goosmann , a CEO, lawyer, author, woman business owner here to help navigate you through the law, your business and life as a leader. For today's podcast episode, I have with me, Aaron Adams , Aaron is a business and banking attorney at Goosmann Law Firm. And today we're going to focus on and talk about the PPP loans and what they mean for you and your taxes. I am super excited to have with me here today, Aaron. Aaron , and I go way back. We actually were in law school together in the same class, and we're really fortunate and excited that a year ago, we got to start working together at Goosmann Law Firm. So Aaron, maybe you could start by just introducing yourself to our listeners.

Aaron Adams:

Sure. Happy to do that. And thanks for the opportunity to join the firm. As, as you said, my name is Aaron Adams. I've been practicing about 20 years, primarily in-house in, you know , industries such as biotech , university of research, real estate, finance, financial technology. Registered to practice in Iowa and Nebraska recently in South Dakota, the patent trademark office , currently pending in, in North Dakota as well. My focus is primarily has been on helping our clients , to prudent decisions to run their day-to-day business. Uh, you know, as general counsel for companies of all size from start-ups to most recently , a fortune 500, both private and public. So I've seen it , most of the things that a traditional business person's going run into , you know, some of the things that are kind of bread and butter for me is drafting the remote negotiating agreements with your customers, with your vendors, your referral partners, your regulators , information security, intellectual property, mergers, and acquisitions, both on the buy and sell side, you know, executive compensation. Dabbled in, you know , healthcare practice, corporate governance, again, being a general counsel at companies of various size and sophistication, like I've said, I've seen it all. So that's kind of a background on me, Jeana.

Jeana Goosmann:

Absolutely. We're so excited to add your depth of experience and your deep bench of knowledge to the Goosmann team. And have you lead others within the firm as well, Aaron, and I know that our clients really enjoy working with you because you have that practical business-minded approach, having been in-house and been on the company side. You're not just giving, you know, here's all your options and a legal treatise, you're saying here's what you should do and why. And I have that a great practical edge to you. So , really a great strength of having you on the team, Aaron.

Aaron Adams:

Well, thank you.

Jeana Goosmann:

And today, one of the things that we're going to talk about are the PPP loans because , the small businesses, which tend to be defined broadly within the , you know, the regulations as far as what is a small business. But they have had a lot of opportunity with the PPP program that came out in this last year. And so there's been some clarification's under the new law that was passed on most recently. And we're going to focus on those a little bit, but just to get us started, Aaron , can you share with our listeners a little bit more in general? What is the PPP in case they've been living under a rock and haven't heard of it?

Aaron Adams:

Sure. So as , as many of you know, with the shutdown of the pandemic , last February and March Congress passed the cares act , authorizing small and medium sized businesses to receive funds, to offset some of their payroll and other approved expenses. So, you know, if you're paying rent , for particular things, your payroll expenses, you could go to the SBA and , obtain a loan for an amount of funds, usually below $150,000 , uh, to offset those for a period of time. It was perceived , and provided that the appropriate documentation to your lenders that most of that stuff would, if you followed the directions , set forth by your lender, that you're going to have those loans forgiven. And were guaranteed to have the funds provided to you. Unfortunately, what happened though, was the department of treasury and the IRS said, Hey, that's a great idea, but we're going to tax you on that stuff. We're not going to treat that as opportunities for you to just receive free money. We want to tax you on it because it's, it's going t o be an offset against your, your income. Well, obviously that gave a lot of borrowers, some heartburn, heart heartache, and a lot of you probably reached out to your local Congressman and said, Hey, I got this tax liability come and due at the end of the year. That was never the intent of this program. Why am I not going to be on the hook for, you know, substantially tens of thousands of dollars, when I'm already behind the eight ball from providing, and getting my business off the ground? Well, Congress decided that was probably a good decision to tell the Department of Treasury and the IRS, Hey, we don't want to do that. And so as part of the new updated relief bill that was signed in December, not only are you allowed to kind of take a second draw on those loans, but they also provide a legislation and information says, yes, we agree. We're now not going to consider that against your gross income. And therefore it's a deductible expense,

Jeana Goosmann:

Which was huge. I know we've lobbied for that to not be taxed , essentially allow those deductions to take place so that the business owners that received those funds didn't get taxed on those dollars. And I know we've led a big campaign with all of our clients to reach out to their Congress people and their senators to help see that through. And, and that was a really big impact. Otherwise, I think people were going to have some negative surprises when they went to see their CPA to file their taxes for 2020. And so right now, the way the law is, and I it's written in the statute, they're not going to be taxed on those PPP dollars. So, or , or, and they can still take those expenses for the money that they spent on those qualified expenses. So a big celebration and a huge win for small business there .

Aaron Adams:

Absolutely. It's , great for everybody.

Jeana Goosmann:

It's great for everyone and I think in the first round of PPP money too, you could get up to $10 million in loans, and then the second round, they capped it at $2 million. If I remember, right.

Aaron Adams:

Yeah , that's right. Yep . And again, with the application process, now that everybody's been through it a little bit, even the SBA lenders that were, that you were working with previously, they kind of have a better understanding of what they want from an application process. So they've certainly streamline their processes to make it even quicker to get those dollars in your hands, if you are so , um, electing to take those advantages and those loans.

Jeana Goosmann:

And let's talk a little bit about the forgiveness process. I know we've helped a number of clients successfully navigate that forgiveness process and Aaron, what can you share with our listeners about the loan forgiveness?

Aaron Adams:

Yeah, so certainly it's going to be dependent on who your lender is on exactly what documentation they're going to require. And certainly once you go over the $150,000 threshold on your loan amount, it's going to get a little more calmer. So not extremely so, but just a little bit more, you know, what we're hearing , from the lenders that we've talked to is it's very diminimous of, Hey, just show me that you truly did on your balance sheet, pay for payroll and for your rents and those other things that are allowed under the statute and okay, that's all we need. Here you go. You're forgiven .

Jeana Goosmann:

And I know the ones that I was involved with, I like to recommend that people set up a separate bank account for their PPP funds, especially if it was substantial amounts of money and then just pay those allowed expenses with those funds. And I think that was a very successful strategy. So to the extent that someone or a business didn't choose to do that the first round, and they're going to go after a second round of PPP, that might be a way to streamline it for you in this, in this next go round, because the clearer, the documentation and the simpler it looks to the bank. I think the faster that those loans get forgiven

Aaron Adams:

Hearing it's brevity and make it as simple as possible. Keep it clean, keep it separated, to your point set up that , different account. And you're going to be fine.

Jeana Goosmann:

How can Goosmann law firm help business leaders navigate these complex issues?

Aaron Adams:

Sure. So, you know, one of the things that, like you mentioned, both , with your clients and some other ones that I've worked with, as well is helping them , you know, find an appropriate lender, if they don't have one in their area. You know, certainly we all have , communication and , referral partners and banks that we work with all the time that we can get you those loans. And then certainly we've got the expertise , having done it the last time around as well, to help you fill out those applications again, because they can be somewhat tricky to make sure you've got the appropriate information on there to get them forgiven on the backside.

Jeana Goosmann:

You bet. So we'll help you get the loan and that we can help you with the paperwork to make sure it's forgiven and answer any of the questions along the way. That's exactly right. And I think it's just important for people to be confident going through the process too. I know a lot of business owners have never received money from the government like this before. And so it's new and it can be kind of scary and you're signing a lot of certifications for different things, and we're here to help hold their hand.

Aaron Adams:

That's right. And, you know, certainly the nice thing too is , uh, traditional SBA loan applications can be somewhat cumbersome to get through because they want to make sure they've got all their paperwork. Congress basically told the SBA lenders this time around, look, we need these funds in these people's hands as easily and quickly as possible. Therefore, the application process has been significantly made a lot easier than those traditional ones. And yet it's, it's not the big, scary worry, something that you traditionally would see from a traditional lender.

Jeana Goosmann:

Yeah. And for the most part, I think if you're using the funds to pay your people and pay your mortgage and pay those itemized expenses that you're able to spend the money on, you can go forth confidently that you're following the law and we're here to help you in that process. So thank you so much, Aaron, for sharing your insight with everyone. And I want everyone to have a great day and go make it worth it. Thank you.

Goosmann Law Firm :

Thanks for joining us for Law Talk with the Flock by Goosmann Law Firm. We hope you feel energized and ready to soar past your goals. Become a flock fan and subscribe to our podcast for weekly episodes. Learn more at goosmannlaw .com .