New law doubles business meal deductions and makes favorable PPP loan changes
With everything happening related to the coronavirus pandemic, Paycheck Protection Program (PPP), and Consolidated Appropriations Act of 2021, you need a trusted advisor on your side. 415 Group Senior Manager Holly Lieser, CPA, explains why this is so important with recent PPP loan changes.
After months of discussion, guidance has finally been issued allowing businesses to deduct expenses paid with PPP loans. This is a huge tax benefit for some companies.
Since the Paycheck Protection Program was introduced, we have been urging our clients to keep good records related to PPP loans. Thankfully, many of them have been doing so. Year-end planning was difficult since the Consolidated Appropriations Act of 2021 (CAA) hadn’t yet passed, making it a challenge to accurately project what some businesses would owe in taxes.
For example, a C-corporation that received a $200,000 loan through the Paycheck Protection Program would have planned to pay an additional $42,000 in taxes. However, thanks to the CAA, they won’t have to. Overall, the impact of this act has been incredibly positive for our clients.
The expansive Consolidated Appropriations Act contains many significant business-related provisions. This is why it’s so important to work with a trusted tax advisor who stays up to date on changes. They can help you sift through the changes and focus on what is important to your business.
The new law includes a change to business meal deductions. The previous deductible limit was 50%. For 2021 and 2022, meals that fit under the related guidelines are fully deductible. This helps businesses, while also bringing awareness to the struggling restaurant industry. The hope is that more businesses will take advantage of this change to help not only themselves but also their local restaurants.
If you want to take advantage of the 100% deductions for businesses meals, be sure to keep those records separate from entertainment costs. Entertainment is still not deductible. This will help you—and 415 Group—during tax season.
Has your business received a Paycheck Protection Program loan? Now is the time to apply for PPP forgiveness. Do not wait until the last minute. With a new round of funding starting, now is the time to consider if you are eligible for a second draw or apply for a first draw if you haven’t yet received one.
If you have questions about PPP loan forgiveness, the Consolidated Appropriations Act, the CARES Act, or other items related to pandemic relief, contact us today.