Entrepreneurs who took a PPP loan this year cannot write off certain expenses on their taxes if they expect the debt will be forgiven, according to the IRS and Treasury Department. The two agencies have issued guidance to clear up the tax treatment of expenses when a loan from the Small Business Administration’s Paycheck Protection Program hasn’t been forgiven by the end of the year.

The IRS and the Treasury issued both a revenue ruling and a revenue procedure, essentially saying that since businesses aren’t taxed on the proceeds of a forgiven PPP loan, the expenses aren’t deductible. The IRS notes that this results in neither a tax benefit nor harm since the taxpayer has not paid anything out of pocket.

“This results in neither a tax benefit nor tax harm since the taxpayer has not paid anything out of pocket,” said the Treasury in a news release. “If a business reasonably believes that a PPP loan will be forgiven in the future, expenses related to the loan are not deductible, whether the business has filed for forgiveness or not. Therefore, we encourage businesses to file for forgiveness as soon as possible.”

The IRS also notes that in cases where a PPP loan was expected to be forgiven, but it is not, businesses will be able to deduct those expenses. However, if a “business reasonably believes that a PPP loan will be forgiven in the future, expenses related to the loan are not deductible, whether the business has filed for forgiveness or not.”

Recently released guidance in IRS Notice 2020-32 further clarifies deducting expenses for PPP loans. The notice make clear that no deduction is allowed under the Tax Code for an expense that is otherwise deductible if the payment of the expense results in forgiveness of the loan under the CARES Act, and the income associated with the forgiveness is excluded from gross income.

Talley’s professionals have spent hundreds of hours reviewing the law, regulations and SBA PPP FAQs issued on an almost daily basis and we are happy to assist you in the process. We are available to simply answer a quick question or assist in the application and/or forgiveness audit process.

The SBA decided, in consultation with the Department of Treasury, that it will review all loans in excess of $2 million following the lender’s submission of the borrower’s loan forgiveness application. That being said, the SBA has reserved the right to also audit loans in any amount at any time, and will likely “spot check” loans in lower amounts.

Since the first round of funding was depleted so quickly, and many large businesses were approved for loans they didn’t need, the SBA is stepping up efforts to make sure every loan is going to the right business, for the right amount, for the right purpose.

When would an audit happen? PPP loan audits will be performed when a business seeks loan forgiveness. However, the borrower must retain PPP documentation files for six years after the date the loan was forgiven or repaid in full.

What are some items that the SBA may verify?

  • Eligibility: Was the borrower eligible for the PPP loan based on the rules and guidance available at the time of application?
  • Loan amount and loan use: Did the borrower calculate the loan amount correctly, and did the borrower use the loan funds for allowed expenses under the CARES Act?
  • Loan forgiveness: Is the borrower eligible for forgiveness on the claimed amount?

Are you using PPP funds correctly? If you are looking for the loan to be forgiven, at least 60% of the fund must be spent on payroll and employee benefits, while the remaining 40% on utilities, rent and mortgage interest. This will be verified by examination of your payroll records and expense documentation. If you spend funds on anything else, you could be subject to additional liability or even charges of fraud.

What could happen as the result of an audit? If you are ineligible for the loan or forgiveness amount, your forgiveness application may be rejected by the SBA and they may demand you repay the outstanding loan balance. You may choose to appeal the SBA’s decision.

How can you appeal? Your appeal must be filed within 30 calendar days after: 1. The receipt of the final SAB loan review decision, or; 2. Notification by the lender of the final SBA loan review decision; whichever is earlier. Once the appeal is filed, a judge will issue a decision within 45 calendar days.

Do you need a CPA for a PPP Audit? Although it is not required to have a CPA during this process, having one will help with finding and preparing documents that will be requested during an audit.

Talley’s professionals have spent hundreds of hours reviewing the law, regulations and SBA PPP FAQs issued on an almost daily basis and we are happy to assist you in the process. We are available to simply answer a quick question or assist in the application and/or forgiveness audit process.

The U.S. Small Business Administration (SBA) released guidance last week confirming that Paycheck Protection Program (PPP) loan forgiveness applications are not due on October 31, 2020. In the SBA’s latest loan forgiveness FAQ document, the SBA explains that borrowers may submit a loan forgiveness application any time before the maturity date of the loan, which is either two or five years from the loan’s origination, depending on the borrower’s agreement.

Fears of an October 31, 2020 PPP deadline came to the SBA’s attention because the program’s loan forgiveness application forms (3508, 3508EZ, and 3508S) show an expiration date of “10/31/2020” in the upper-right corner. This prompted the SBA to calm PPP borrowers’ fears of a surprise deadline by issuing a new entry in its loan forgiveness frequently asked questions document answering “Is October 31, 2020, the deadline for borrowers to apply for forgiveness?”

What is the Paycheck Protection Program (PPP)? The PPP is a part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. This act authorizes the Treasury to use the SBA’s 7(a) small business lending program to fund loans of up to $10 million per borrower that qualifying businesses can spend to cover payroll, mortgage eligible costs.

Talley’s professionals have spent literally hundreds of hours reviewing the law, regulations and FAQs issued on an almost daily basis and we are happy to assist you in the process. We are available to simply answer a quick question or assist in the application and/or forgiveness process.

As 2020 is coming to a close, employees of both large companies and small businesses are finding themselves in a rut as they continue to work from home. A survey conducted by FlexJobs and Mental Health America found that 75% of people have experienced work burnout and 40% said they felt it during the pandemic. Between job-less worries, work-from-home challenges and feeling overwhelmed, it’s easy to understand why both businesses and employees are experiencing work burnout as well as other mental health issues.

  • Acknowledge the problem. The first step in managing burnout is to acknowledge that you’re dealing with it. The symptoms of work burnout, as defined by the World Health Organization (WHO), include feeling: emotionally and/or physically drained; mentally checked out at work; excessive pressure to succeed and the need to hide personal concerns while at work. If you’re concerned about your mental health, you can take a free confidential and anonymous online screening at the Mental Health America website here.
  • Look into employer-provided mental heath benefits. These include telemedicine screenings, employee assistance programs and stress reduction programs. If your employer doesn’t provide assistance, look into services offered through local nonprofit agencies, veterans organizations or your state office of mental health.

  • Establish firm work/life boundaries. When you work from home, it’s critical to set healthy boundaries to keep the stress and demands of work from interfering with home life and vice versa. While not everyone has the option to dedicate a room in their home as their personal office, try to create a dedicated workspace that limits as many distractions as possible. Focus on work tasks before personal tasks, especially in the morning; later in the day, when you need a break, you can squeeze in personal tasks, exercise, or a fun activity to unwind.

Talley shares the same entrepreneurial spirit that has helped propel our clients to their current levels of success. With over 25 years of experience assisting high net worth individuals and business owners, Talley has the expertise necessary to help entrepreneurs throughout their entire journey, from formation to succession.

The U.S. Small Business Administration (SBA), in consultation with the Treasury Department, earlier this week released a simpler loan forgiveness application for Paycheck Protection Program (PPP) loans of $50,000 or less. This action streamlines the PPP forgiveness process to provide financial and administrative relief to America’s smallest businesses while also offering additional guidance on lender responsibilities.

Simplifying Forgiveness for Many. Under the new Interim Final Rules (IFR), Businesses that borrowed $50,000 or less won’t have the amount of their PPP loan forgiveness reduced based on reductions in full-time-equivalent employees or reductions in employee salary or wages. The newly simplified forgiveness application, Form 3508S, can be used by borrowers with a total loan amount of $50,000 or less, unless they and their affiliates received loans totaling $2 million or more.

For PPP loans of all sizes, the IFR also contains guidance on lender responsibilities with respect to the review of borrower documentation of eligible costs for forgiveness in excess of a borrower’s PPP loan amount.

Congress created the PPP as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was signed into law on March 27. The legislation authorized Treasury to use the SBA’s 7(a) small business lending program to fund loans of up to $10 million per borrower that qualifying businesses could spend to cover payroll, mortgage interest, rent, and utilities.

PPP borrowers can qualify to have the loans forgiven if the proceeds are used to pay certain eligible costs. The program stopped accepting applications on Aug. 8 with almost $134 billion of congressionally approved funds remaining unspent.

Talley’s professionals have spent literally hundreds of hours reviewing the law, regulations and FAQs issued on an almost daily basis and we are happy to assist you in the process. We are available to simply answer a quick question or assist in the application and/or forgiveness process.

Have any questions about the PPP? Contact Us.

From Olympic medals to national championships, the world of elite sports is full of inspiring stories of hard work and determination. Similar to the career of an entrepreneur, success in this profession doesn’t come easy. Being a star player often requires long hours, creative thinking, and commitment to the team. Although physical talent is key to an athlete’s success, their mindset is even more critical and can teach entrepreneurs a few lessons on how to be equally victorious in the board room.

Continue to set goals and improve. Plateauing is both an athlete’s and an entrepreneur’s worst enemy. An athlete must set performance goals and create a plan to achieve new career milestones. Consistent practice and self-evaluation allow them to perform their best as a competitor. Likewise, entrepreneurs should set overall goals to keep their businesses moving in the right direction. They should focus on making a game plan that will help them improve as they continue to grow. Breaking their overall goals down into micro-goals is one way they can make tracking their progress more manageable.

Don’t be afraid to take risks. Most successful athletes did not get where they are by playing it safe. Risk and reward often go hand in hand, so pushing that extra mile or taking that final shot are what differentiate elite athletes from the average player. Finding a balance between risk and recklessness is also critical for entrepreneurs. Being too scared of change will inhibit growth, and changing too much at once will cause failure. Calculated risks are the solution to keeping a business ahead of competitors while taking potential concerns into account.

Keep your head in the game. The greatest athletes in the world are also recognized as leaders. Their hard work, ambition, and drive are qualities any director, CEO, or business influencer can aspire to possess. If an athlete makes a mistake, being able to separate their failures from their present performance allows them to continue reaching for success. Entrepreneurship may be one of the most challenging business environments, but business owners must maintain a level head throughout the ups and downs. Entrepreneurs need to stay confident in themselves even when the odds are stacked against them.

Talley shares the same entrepreneurial spirit that has helped propel our clients to their current levels of success. With over 25 years of experience assisting high net worth individuals and business owners, Talley has the expertise necessary to help entrepreneurs throughout their entire journey, from formation to succession.

As companies pursue success, avoiding fatigue should be a priority for employers and employees alike. According to the National Safety Council, sleep deprivation effects over 43% of workers, which ultimately deteriorates workplace productivity and safety. They estimate per year the loss per employee to be between $1,200 and $3,100, a large sum considering the size of a workforce. To combat this problem, here are three tips that can help you and your business battle fatigue.

Evaluate your lifestyle.  Lack of sleep is the most significant contributor to fatigue, and a few updates to your routine can make a world of difference. Temperature, bedding, nearby electronics, and lighting are all factors that can influence the way you sleep. Making gradual adjustments can help you determine which changes improve your quality of sleep and will leave you better rested. In addition to sleep, factors like diet and exercise have a considerable influence on your energy levels. To establish a baseline, keep a lifestyle log over a few weeks to determine which foods or activities make you feel better and worse. You may find that your most tired days are directly linked to certain foods or workouts that drain you.

Go see your doctors. Sometimes fatigue can be rooted in a deeper cause that no amount of sleep or habit tracking can help. It is essential to maintain your yearly checkups at the doctor to assess your health, but if your fatigue is affecting you long term, seeing your doctor again can only help you. Simple blood work or allergy tests can point to common biological and environmental causes preventing sleep. If the problem is more serious, a doctor can best help you find out why. Either way, a checkup can help you get treatment and get back on your feet.

Listen to your body. If your body needs something, do not feel bad about giving it that. Personal health is something many overworked business professionals may be ignoring, risking long term consequences. Taking a day or two off when you are too stressed or tired will allow your system to reset and recharge. Whether you are a boss or an employee, fatigue can affect you, so being mindful of your well-being will help you not only be more effective but improve your overall happiness.

Talley shares the same entrepreneurial spirit that has helped propel our clients to their current levels of success. With over 25 years of experience assisting high net worth individuals and business owners, Talley has the expertise necessary to help entrepreneurs throughout their entire journey, from formation to succession.

What happens once your business has experienced initial success or substantial growth? Having “real” money can bring about complex problems that your business hasn’t yet encountered. With the help of professional advisors, there are a few ways to make sure you handle these issues effectively and ensure your successes only continue.

Be aware of burnouts. Burnouts are a big reason for business failure, especially in the first year and taking that time to appreciate your accomplishments can help prevent this.  Part of avoiding burning out is ensuring that you maintain your personal and mental health. All the business and productivity advice in the world won’t help you if you’re already stressed out, sleep-deprived, and running yourself into the ground before you take that first sip of coffee or tea in the morning.

Be mindful of taxes. While running your business, it’s easy to focus on the day to day operations, forgetting about important long-term details such as tax planning. Working with an experienced tax planning advisor can help you mitigate taxes and proactively plan for the future of your business.

Plan for your long-term future. There will always be more money to be made as an entrepreneur and reaching your first goal is only the beginning.  Although using your earnings to fund entertaining purchases is an earned right, investing your money in things that can appreciate will set you up for continued wealth. Having an expert counsel can help you make these decisions as they are familiar with the challenges that characterize an entrepreneur’s business ventures.

Form habits that create continued success. Specific motivators made you successful in the first place, so do not stop focusing on them. Running a business calls for ongoing work but managing your time effectively and forming useful business habits can help take the stress off you. Always set new goals for you and your business to ensure you achieve continued growth and success.

Talley shares the same entrepreneurial spirit that has helped propel our clients to their current levels of success. With over 25 years of experience assisting high net worth individuals and business owners, Talley has the expertise necessary to help entrepreneurs throughout their entire journey, from formation to succession.

Big data is only getting bigger as business usage increases and more companies change the way they look at their processes in 2020. More than analyzing buying patterns or customer relationships, big data can allow entrepreneurs to improve their financial forecasting and future trends.

Predicting company success and finding potential opportunities is a common goal for any entrepreneur. By leveraging real-time/big data metrics, finance teams can gain valuable insight into trends, improving their ability to take advantage of upcoming opportunities or mitigate risk. When considering the benefits, implementing big data metrics does not have to overcomplicate your existing financial reporting methods.

Utilize the resources you already have in place. Businesses big and small are already housing stores of information in their existing business or sales management systems. For example, customer relationship management systems hold valuable details about sales, sizing, markets, and more than can be referenced across departments. However, all that data means little without the ability to effectively distinguish between what is important and what is just white noise. These details, although large in quantity, can allow forecasts to adjust as events occur if properly utilized.

Don’t be afraid to let go of old technology. The typical Excel spreadsheet forecast focused on historical trends is very limiting when considering how extensive your decision-driving data may be and the way activities affect different parts of your business. These simple documents continue to emphasize the inefficiency of solely using historical data to make future business decisions. By embracing real-time metrics and overall real-time forecasts, entrepreneurs can gain a greater understanding of how specific actions affect their forecasts.

From technology-based accounting solutions to management information, analysis, and reporting, Talley LLP is the premier business consulting firm for entrepreneurs and their closely-held businesses. For more information on how to leverage your business’s data technology, contact Talley today.

Taylor Swift is no small name in the entertainment industry having millions of fans across the globe, selling over 30 million albums, and being named the highest paid celebrity in 2019 according to Forbes. Although the artist is known to make headlines, the most recent news comes from the purchase of her former record label Big Machine Label Group by her longtime adversary Scooter Braun. Since Swift’s first six albums contractually belong to Big Machine, Braun gains ownership of her master recordings along with the label. This estimated $300 million deal and Swift’s loss of ownership of a lifetime of work shines a spotlight on the importance of contract negotiation.

Swift commented on the situation via Tumblr stating that for years she had attempted to gain control of her work, but her only option was to re-sign with Big Machine and earn one album back by recording a new album for the label. This album for album trade felt like the perpetuation of Big Machine’s control over Swift’s recordings and ultimately led her to move to Republic Records last year. Although the loss of five albums of master recordings was a tough call to make, Swift’s new contract gives her the rights to her latest album to be released next month and all future music she creates.

While Swift was aware that her master recordings could be sold to the next owner of Big Machine, the acquisition by Scooter Braun felt like salt in a deep wound. In her Tumblr post, she mentions being bullied and manipulated over the years by Braun and his associates, who include Justin Bieber and Kanye West. Although the situation is her “worst case scenario,” Swift has seemingly maintained a positive outlook on the future of her music with the support of Republic Records.

In many cases in the entertainment industry, the first contract a performer signs may give industry professionals the upper hand. Swift was fifteen when she got her big break with Big Machine, and it is evident that she would have made contractual changes if she had the power or the knowledge at the time. A buy-back clause could have given her the option to purchase her masters, or a “non-assignment” clause may have allowed her to have some deciding power on if the recordings belonged to a new owner of the record label. At the least Swift can hope that young entertainers can learn from her experiences and be more prepared when their big shot comes.

Whether a recording deal contract or an M&A transaction, every negotiation is unique and needs to be approached with the proper strategy and insight. Talley LLP is uniquely equipped to provide the technical and managerial expertise to help you plan, negotiate, structure and execute on your buy-side or sell-side strategy.


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