PPP Loan Forgiveness Timing

Chris Wittich


They say timing is everything.  Is that true for PPP Loan forgiveness timing? There really has not been any law changes or updates to the PPP program recently other than the blog we have up about the ownership changes and the change for the PPP loans under $50k.  But I wanted to put down my thoughts on just where we stand on PPP Loan Forgiveness and what I see as the path forward.

Congress has still not acted.  That means your expenses that were paid with PPP money are not going to be deductible as of today.  I am still hopeful they will allow that, but the timing of when Congress will act is probably at least a few weeks away yet, not prior to the election it seems.  Uncertainty is bad news and it continues to be uncertain.  Personally, I think there is still a 60% chance that ultimately Congress will act and you will be allowed a deduction.  Keep that in mind when doing your tax planning this year.  That means there is a 40% chance you don’t get a tax deduction for those expenses paid with PPP funds.  There is currently no guidance on which year you would lose those deductions.  I don’t know when guidance might arrive on this topic, but it’s increasingly becoming a discussion point as Congress has failed to act and we start to approach year end.  There is an argument that you lose the deductions in 2020 (personally that’s the one I believe to be accurate based on the tax law) but there is also an argument that if you submit your forgiveness in 2021 that you would have a choice potentially of which year you lose the deductions.  Choices are a good thing so if waiting to submit might get you a choice then it’s worth waiting in many situations.  I’m not sure if I explained that well, it’s really a technical issue so I’ll summarize my current opinion like this:

  • 60% chance you get a tax deduction and it’s not going to matter when you submit your PPP forgiveness
  • 30% chance you do not get a tax deduction, and you will lose that deduction in 2020, and it will not matter when you choose to submit your PPP forgiveness
  • 10% chance you do not get a tax deduction, and if you wait until 2021 you may have a choice of which year that deduction is lost, 2020 or 2021

To me, even a 10% chance that you get to choose which year you lose that huge tax deduction is a compelling reason to wait and see what happens instead of submitting your forgiveness application right now.  If you put everything together now, you can check back on the status of these percentages like December 20th and if it makes sense to submit in 2020 then you’ll have it all ready to go and submit for the forgiveness in 2020.  If it makes sense to wait, then you hang on and submit it like January 10th so it’s submitted in 2021.  I can clearly see upside to waiting until late December to decide when to submit and I see no downsides based on the current law.  Obviously if Congress passes something that’ll change the calculus on this again, but for now that’s my view.  As a reminder you have 10 months from the end of your 24-week period to submit your PPP loan forgiveness application so there is no reason to rush into a decision.  Every situation is different so reach out and have a specific plan for your business on when you submit your PPP Forgiveness application.  If you want to discuss this further, contact one of our Leadership Team members.



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