Commercial Integrator June 2021 - 15

SMB INSIGHT
Navigating the Tax Implications of the
PPP and COVID-19 Relief Programs
This tax season could prove to be complicated for SMBs given tax implications of COVID-19 relief
programs like the Paycheck Protection Program. by Zachary Comeau
THE PAYCHECK PROTECTION Program
and other programs were aimed to help
small and medium-sized businesses weather
the storm throughout 2020 and the
remainder of the COVID-19 pandemic.
For small to mid-size AV integrators,
these programs have been especially popular
as business took a nosedive last year
during the early days of the pandemic.
However, the tax implications of the
PPP and other pandemic relief legislation
are many, and the U.S. Small Business
Administration has issued guidance
clarifying these laws that have changed
several times-including in December when
Congress passed a second relief package
that included reopening the PPP.
We spoke to Jeffrey Bronswick, CEO
of Bronswick Benjamin, a Chicago-based
certified public accountant and NSCA partner,
about the challenges and benefits of
your 2020 tax year. With other information
sourced from the U.S. Chamber of Commerce,
here are some common questions
you June have regarding your 2020 business
taxes and how they square with some
COVID relief programs like the PPP.
Are Forgiven PPP Loans Considered
Taxable Income?
In short, no. At least not federally. A PPP loan
can be forgiven if a business meets certain
benchmarks for spending on employee payroll
costs. For 2020, those forgiven loans
are now not considered taxable income and
are completely tax-exempt. That change
was made in December, when Congress
passed the Coronavirus Response and Relief
Supplemental Appropriations Act of 2021.
" This is a major positive announcement
that came a few months ago, " says
Bronswick.
However, that is true for federal taxes
only. According to the tax foundation,
several states treat this differently. According
to the Tax Foundation, 17 states tax forcommercialintegrator.com
These
laws and guidance could again change, so consult with a tax professional
before making any decisions.
given PPP loans either as taxable income or
expense deduction disallowed.
" Therefore, companies should be aware
that they need to check their state's rules
on the taxability of forgiven PPP loans, "
Bronswick says.
Luckily, most of that forgiveness is occurring
in 2021, so this hasn't yet presented
itself as a large issue.
" Fortunately, state tax rates are much
lower than federal, " Bronswick says. " However,
it can still be significant dollars. "
Can a business write off payroll, rent
and utilities as business expenses if a
PPP loan was used to pay for them?
Yes. " All expenses made with PPP Funding
are deductible under the normal provisions of
the Internal Revenue code, " Bronswick says.
According to the U.S. Chamber of Commerce,
that too was changed in December
with the passage of the Coronavirus Response
and Relief Supplemental Appropriations
Act, 2021 ( " CRRSAA " ). Now, business
expenses paid for with PPP funds can be
written off like everyday business expenses,
the Chamber says.
Can I Get Both A PPP Loan And
Take Advantage Of The Employee
Retention Tax Credit?
Yes. Again, as of December 2020, business
can get a PPP loan and take advantage
of the Employee Retention Tax Credit for
2020 and 2021 if they experience either a
" full or partial suspension " of their business
during any quarter or a " significant decline
in gross receipts, " per the IRS.
A business that took out a PPP loan in
2020 can now apply the ERTC to their 2020
taxes, provided the ERTC and PPP don't
cover the same payroll expenses. According
to Bronswick, PPP funding and the ERTC
can't overlap the same period of time, but
they can both be used in the same tax year.
The 2020 max credit is $5,000 per
employee in 2020, but the ERTC was
expanded in the 2021 tax year to allow for
a maximum of $7,000 per employee per
quarter through the end of June. Again,
there can be no overlap with the second
round of PPP funding.
As of March 11, 2021, the ERTC program
was once again extended, this time
through the end of 2021.
JUNE 2021 Commercial Integrator
15

http://www.commercialintegrator.com

Commercial Integrator June 2021

Table of Contents for the Digital Edition of Commercial Integrator June 2021