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PPP Expenses Will Now Be Deductible

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New Relief Package Set to Allow PPP Covered Expense Deductibility, Expanded Credits and Stimulus Payments

Over the last couple of months, we have been fielding questions from many clients about the CARES Act – especially the loans and the forgiveness of loans available for small businesses that we outline in our Coronavirus Resource Center.  I actually co-wrote an article back in March with Jennifer Mailhes, CPA from Doeren Mayhew entitled “Five Things Small Businesses Should Know About the COVID-19 Disaster Loan Relief”.

Congress has finally settled on a new COVID-19 stimulus legislation – The Emergency Coronavirus Relief Act of 2020, which expands the employee retention credit, extends various expiring tax credits, distributes stimulus payments, and allows the deductibility of Paycheck Protection Program (PPP)-funded expenses, even if forgiven…this is a big change from prior IRS Accouchements.  As an example, If you had a forgiven $100,000 PPP Loan that you used for payroll and other allowable expenses, earlier this year, the IRS stated that these expenses were not deductible.  With that PRIOR IRS interpretation, someone in the 37% tax bracket would have had an extra $37,000 tax liability.  With this legislations Congress corrects that problem allowing impacted businesses to deduct these expenses – with the majority being employee payroll (remember the legislation was the “PAYCHECK Protection Program”) that helped many employees from being furloughed. 

The $900 billion bill, the second-largest next to the Coronavirus Aid, Relief, and Economic Security (CARES) Act in U.S. history, would initiate the following relief measures, among others:

  • Direct stimulus payments of $600 to most Americans.
  • Enhance unemployment benefits by $300 per week through March.
  • Enforce Direct the Internal Revenue Service (IRS) to allow the deductibility of expenses related to PPP loan forgiveness.
  • Provide an additional $284 billion in funds available through the PPP.
  • Allow an additional 13 weeks of unemployment benefits for those that have exhausted their regular state benefits.
  • Extension of the employee retention credit, with an increase to 70% of qualifying wages and $10,000 per quarter limit on creditable wages.
  • Make the earned income tax break and child tax credit available to people who have lost wages during the pandemic.

It is anticipated that President Trump will sign the bill into law before the new year…so stay tuned.  Both STA Wealth and Doeren Mayhew will keep you updated as the bill progresses through the legislative-making process.


Disclosure:

The information herein has been obtained from sources believed to be reliable, but we do not guarantee its accuracy or completeness. Neither the information nor any opinion expressed constitutes a solicitation for the purchase or sale of any security or product. Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by STA Wealth Management, LLC), or any non-investment related content, referred to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from STA Wealth Management, LLC. Please remember to contact STA Wealth Management, LLC, in writing, if there are any changes in your personal/financial situation or investment objectives to review/evaluating/revising our previous recommendations and/or services. STA Wealth Management, LLC is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the STA Wealth Management, LLC’s current written disclosure statement discussing our advisory services and fees continues to remain available upon request.  Financial Planning and Investment Advice offered through STA Wealth Management (STA), a registered investment advisor. STA does not provide tax or legal advice and the information presented here is not specific to any individual’s circumstances. To the extent that this material concerns tax matters or legal issues, it is not intended or written to be used, and cannot be used, by a taxpayer to avoid penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.  All information provided herein is for educational purposes only – use at your own risk and peril.

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