With all the changes in tax law, more importantly, all the stimulus from the last couple of years, it is important to keep track of the payments your business received as much of it is not taxable. This podcast covers the different stimulus, grants and loans that businesses may have received.
Let’s start with PPP round 2
- Paycheck protection program round 2 was given out in early to mid-2021.
- As with the first round, any amounts received and forgiven are not subject to federal tax and also not taxable for most states.
How about the EIDL?
- The Economic Injury Disaster Loans which were given out in 2020 and 2021 had two parts.
- The first part was an advance/grant that did not need to be repaid. Just like the PPP, this would be not taxable for federal and most states.
- The second part was an actual loan that is currently being paid back. Since it is a loan, it would not be counted as income. In this case, as payments are made any interest paid would be deductible just like any other loan.
Employee Retention Credit (ERC)
- The ERC was available for businesses in 2020 and went through September 30, 2021.
- The refundable credit based on a decrease in revenue is taxable for federal.
- For states, you will have to look as some do tax it, while Wisconsin is not taxing it.
SBA forgiveness payments
- If your company had an SBA (small business association) loan, there was a time period where the SBA made the payments for you.
- Any payments made for you by the SBA is not taxable for federal income tax purposes.
- It may or may not be taxable for your state.
What about the COVID sick pay credits
- These were credits paid to employers when their employees were sick or in other cases affected by COVID.
- These credits are generally taxable for federal purposes, but the state treatment varies.
- Wisconsin does not tax them, while MN and a number of other states do.
What about state and local grants
- Most of these grants are taxable for federal purposes and the state treatment depends on the state.
- For example, there are a number of grants administered by Wisconsin that are not taxable for state, but they are taxable for federal.
- Minnesota also had a number of grants and those grants are taxable for federal and state.
Be sure to talk to a tax professional if you have any questions about a stimulus, grants and loans that your business may have received.
As a partner, I have thorough experience providing tax services to individuals, privately held businesses, nonprofit entities and estates and trusts. I also provide compilation and review services.
