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How is accountant treating your PPP loan

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  • How is accountant treating your PPP loan

    I was wondering how people's accountants are treating their unforgiven PPP loans to your practices (and is there specific IRS guidance or is it up for debate?). We are an S-corp that in most years pays out any leftover revenue as W2 income so the corp's net income for the year is always right near zero. With the PPP loan, we received that & its not on the income statement as revenue, since a loan normally wouldn't be revenue. We used it to pay income so this year the corp has a large loss for the year, which will flow through to be a large personal deduction for my personal return. Is this how other people's accountants are doing it? And do you know what they will do when its forgiven? Either amend your 2020 return or otherwise have a big gain for your corp in 2021? Thank you

  • #2
    After doing some more searching my accountant sent me a couple articles indicating that per IRS guidance late in 2020 that: 1) even forgiven loans need not be mentioned as revenue/gross income on the tax return and 2) the expenses that were paid with the loans can still be deducted. So it seems to be win-win on both counts.

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    • #3
      Originally posted by surgdoc View Post
      After doing some more searching my accountant sent me a couple articles indicating that per IRS guidance late in 2020 that: 1) even forgiven loans need not be mentioned as revenue/gross income on the tax return and 2) the expenses that were paid with the loans can still be deducted. So it seems to be win-win on both counts.
      Same for provider relief funds right? CARES act

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      • #4
        Not sure...do you mean the funds that were a grant (never being paid back) or the ones that Medicare will be taking back next year? Its a good point I should ask my accountant re that too.

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        • #5
          • Accountant is correct about non-taxability of PPP funds and deductibility of expenses pd from them (came out in late Dec)
          • Provider Relief Funds under CARE are taxable.
          Our passion is protecting clients and others from predatory advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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          • #6
            Thank you!

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            • #7
              Originally posted by jfoxcpacfp View Post
              • Accountant is correct about non-taxability of PPP funds and deductibility of expenses pd from them (came out in late Dec)
              • Provider Relief Funds under CARE are taxable.
              Since we are not getting a 1099 for provider relief funds, how would we report it when using retail tax software such as HR block? (sole proprietor)

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              • #8
                Originally posted by GastroMastro View Post

                Since we are not getting a 1099 for provider relief funds, how would we report it when using retail tax software such as HR block? (sole proprietor)
                hmmm - my understanding is that you will get a 1099 if you received > $600 in Provider Relief Funds. Regardless, at this point all I know is that you'll report it as you do other revenue.
                Our passion is protecting clients and others from predatory advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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                • #9
                  Originally posted by jfoxcpacfp View Post

                  hmmm - my understanding is that you will get a 1099 if you received > $600 in Provider Relief Funds. Regardless, at this point all I know is that you'll report it as you do other revenue.
                  You are absolutely correct:

                  “Form 1099s will be mailed by January 31st, 2021. If you have previously established an account with UnitedHealth Group and elected to receive electronic copies of documents and notices, you will not receive a mailed copy. “

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                  • #10
                    We received a separate 1099 for our CMS grant money so clearly that needs to be reported on tax return (the money from CMS that does NOT need to be repaid).
                    What about the CMS advance that does need to be repaid starting in 2021 - was that taxable income in 2020? I can't tell if that was included in our 1099 from National Govt Services (or if it wasnt are we supposed to report it ourselves separately). Anyone know? Per this link they seem to be saying the advance DOES need to be reported in 2020 income Medicare Advance Payments – Considered Revenue in 2020? | HMA (hmamass.com) Anyone hear anything different?

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                    • #11
                      I see now after dissecting my NGS (Medicare) 1099 that they did NOT include the advance money in there - does that mean it should not be reported on tax return? Is the part that they recoup going to be on next years 1099 so if I pay taxes on it this year I'm being taxed twice on that portion?

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                      • #12
                        Originally posted by surgdoc View Post
                        I see now after dissecting my NGS (Medicare) 1099 that they did NOT include the advance money in there - does that mean it should not be reported on tax return? Is the part that they recoup going to be on next years 1099 so if I pay taxes on it this year I'm being taxed twice on that portion?
                        You won’t be double-taxed - if you report it this year, you will adjust in 2021 for the amount already reported as income. According to your link, it should be reported this year, but I disagree with that, especially given your 1099 reporting. Accounting principles state that receipts are not included in income until there is no risk of forfeiture. I believe that it should not be reported in 2020, but this is my opinion. We have not discussed in our office yet.
                        Our passion is protecting clients and others from predatory advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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                        • #13
                          Thanks for your perspective. I called NGS today to see if they had an opinion (no they're not the IRS but I figured couldn't hurt). The phone rep, and even her 2 supervisors, were unaware the advances weren't on their 1099s so they had to do research and will get back to me.
                          While yes if I report it myself this year I can logically ignore it next year (if it somehow ended up on the 1099 the year they recoup it back, and not the year they advanced it, which would seem weird but hey its the government we're dealing with here) - but if its on a 1099 next year and I ignore it, and the sum of my 1099s end up being more than my reported revenue, then I'd expect I might get a "nasty letter" and I'd like to avoid that. I'll follow up if NGS gets back to me with any good info.

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                          • #14
                            Originally posted by surgdoc View Post
                            Thanks for your perspective. I called NGS today to see if they had an opinion (no they're not the IRS but I figured couldn't hurt). The phone rep, and even her 2 supervisors, were unaware the advances weren't on their 1099s so they had to do research and will get back to me.
                            While yes if I report it myself this year I can logically ignore it next year (if it somehow ended up on the 1099 the year they recoup it back, and not the year they advanced it, which would seem weird but hey its the government we're dealing with here) - but if its on a 1099 next year and I ignore it, and the sum of my 1099s end up being more than my reported revenue, then I'd expect I might get a "nasty letter" and I'd like to avoid that. I'll follow up if NGS gets back to me with any good info.
                            There is a way to take care of that but I’d rather find out the proper treatment first and I’m not sure at this point.
                            Our passion is protecting clients and others from predatory advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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                            • #15
                              I just heard back from NGS. They said the advances are NOT in 1099s this year but will be included next year when they are recouped. In their words "we are treating it like a loan and the loan would not be added to the 1099, it would be treated as income when we request repayment". So it would seem that you should NOT claim that revenue this year (but do claim whatever expenses you paid with it), because its going to be on your 1099 next year? So for an S-corp like ours, which in normal years has pretty much break-even net income due to paying all profit out through W2 income, this year we will have a loss roughly equal to the sum of the PPP loan plus the Medicare advance.

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