Loans – Small business owners may have to pay state taxes on PPP loans
EAU CLAIRE, Wis. (WEAU) – With tax season around the corner, small businesses could be on the hook for thousands of dollars.
“It’s been kind of a holy-moly for a lack of a better word because it’s been a surprise because now all of a sudden our small businesses on the Wisconsin side have an increase in taxable income,” says Jan Schaffner, senior tax manager and accountant at Kostner, Kolso & Brovold LLC.
In November, the IRS said expenses paid for with PPP loans that were or would be forgiven could not be deducted for federal tax purposes.
Then, in the latest round of the coronavirus relief, signed into law late December, Congress created a legislative fix on the federal level.
“Any small business that received the PPP loans and applied for forgiveness or were going to apply for forgiveness were able to go ahead and basically not have the income and have the income still that they paid with those funds, so its kind of the best of both worlds,” says Schaffner.
So what’s the hold-up? Small businesses, many of which are under financial strain amid the pandemic will not be able to deduct those expenses from their state taxes unless state Legislature and Evers intervene.
Dave Gordon, owns Foreign 5 and Lucy’s Eatery in downtown Chippewa, he says the PPP loans have kept his businesses afloat.
“Our concern at this point in time is that that loan is running out and customers are still not coming back,” says Gordon.
Then to receive news there may be more costs coming, Gordon says is disheartening.
“When you’re having sales that are one-tenth the cost of staying in business it’s a little tough to stay open and so you cut costs, you try to save dollars anyway you can,” says Gordon. “So anything not giving us the benefit of the PPP without additional expenses is going to be a problem.”
“So all of a sudden now they kind of got the rug pulled out from underneath them because what they needed to apply for forgiveness is now kind of being used against them because they can no longer deduct that if Wisconsin does not adopt these,” says Schaffner.
Schaffner says the more people who contact their state representatives, the more likely the measure will get much-needed attention.
“The problem is that filing season opens on February 12 and so time is really not on our side on this,” Schaffner explains.
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