Post-PPP Taxes to Understand

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The Paycheck Protection Program loans were a top priority for most struggling businesses due to the COVID 19 pandemic. Although these loans were beneficial to small businesses, most business owners find it hard to understand the tax implications. Below is a comprehensive description of the Post-PPP tax obligations.

Paycheck Protection Program Loans

PPP loans were awarded to small business owners to prevent them from going out of business and to retain their employees. Under the PPP program, small and medium business owners received a loan of up to two-and-a-half times the average monthly payroll. This loan had a cup of about $10 million.

The PPP loan intent was to cover the payroll and other business expenses during the COVID 19 pandemic. If properly appropriated on the approved expenditure, these loans are forgivable. However, if not, repayment of the funds will attract low interest and extended repayment periods. Although these funds have been beneficial to most small businesses and their employees, confusion about the tax implications has arisen.

Tax Implications of The PPP loans

Will the businesses that received the Paycheck Protection Program loan have a different tax situation than the previous years? This question was the concern of most business owners. The possibility that the loans would get considered as the taxable expense was another confusing aspect of these funds.

Although the Paycheck Protection Program (PPP) was seen by many as a lifeline, experts warned that the legislation could become a tax-laden time bomb. In May 2020, the IRS issued Notice 2020-32. This notice declared that if PPP loans were not taxable. However, the expenses usually not considered as tax-deductible wouldn’t be deductible. These expenses include utilities and rent.

This declaration threatened to kneecap the most attractive part of the PPP loans. However, Congress came to the rescue when they passed the recent PPP funding through the (C.R.R.S.A.A) Coronavirus Response and Relief Supplemental Appropriation Act. This act reversed the decision of the IRS made on the Notice 2020-32.

The Congress act declared that any forgiven PPP loan would be tax-exempted income. Thanks to this clarification, business owners can now take a Paycheck Protection Program loan and still get the (ERTC) employee retention tax.

Raising Money-Savvy Kids

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Unfortunately, money management does not fall under the curriculum taught in school. Parents are responsible for leading by example and teaching the basics of money management. It may seem like a daunting task, because most people do not remember how they were taught about money, they just know it now. That’s why I put together this list in order to give you ideas on how to start raising money-savvy kids.

Talk About Money

The first step in teaching your children about money is constructing an ongoing, open discussion about money. Talking about money is something we don’t normally deem acceptable. We do not disclose salaries, we try not to lead onto how much we have, and we certainly do not ask other people about their money. These social norms have their place within our society and it’s important to stress that to your children as well. There’s a time and a place for everything. When it comes to money, let your children know they can talk to you about it, ask questions, and not fear making you uncomfortable.

Budget Together

Budgeting is a huge part of money management. Keeping track of spending and setting restrictions on yourself is a great habit to establish early. Budgets are hard to implement after bad habits are formed, so to avoid forming them, budget together. You can be as open about this as you’d like. If you want to be completely transparent and work on the household budget, go for it! If that seems too daunting, work on a personal budget with your child. Have them outline goals and also learn how to work with the income (allowance) they receive.

Utilize Teachable Moments

There will be many teachable moments throughout your money management lessons. Identifying them and knowing how to come out the other side with a lesson is a great way to further instill all you both have been working towards. There are opportunities for real world application everywhere. Include your children in on the family grocery shop. Explain how much you plan on spending and how you came up with that number. Then work together to stick to it!

Use Tough Love (even when it’s hard)

Tough love is a necessary evil when it comes to learning about money. You more than likely ran into some financial trouble at one point or another. After you recovered and stabilized your finances, you learned a valuable lesson about what not to do. Providing children with these realizations early on can firmly cement your teachings into their minds. They may have to find out the hard way that it wasn’t a good idea to blow all their money on a toy the day they receive their allowance. Your child won’t even learn that lesson until a few weeks later when they do not have enough money for something else they desperately want. By not giving in and buying it for them, you’re practicing tough love so they can learn a valuable lesson.