The Small Business Administration (SBA) created opportunities for small businesses to receive relief during the COVID-19 outbreak to aid with the struggles the pandemic had unleashed for many small businesses. To help with such circumstances including loss of business revenue, to payroll protection, many small businesses qualified to receive assistance in the form of loans to help keep their businesses maintained and find ground to grow.
With repayment having begun on these relief loans, there are steps small business owners can take to avoid penalties and potentially additional taxation by the IRS. As a tax preparer, help your clients who’ve obtained the Paycheck Protection Program (PPP), Economic Injury Disaster Loan (EIDL), or both and be informed on what they need to do next to stay compliant!
The PPP Next Steps
The PPP loan was designed to help qualified small businesses to keep employee retention and compensation maintained through the trying times. This loan could be forgiven if the small business qualified and submitted proper documentation to be considered during the pandemic. If your client received the PPP, make sure to remind them to keep tabs on the status of their loan disbursement, if they’ve used it all, when to apply for forgiveness, and how to properly report it on their tax documents.
As a tax professional, you should be aware of the notice that the IRS recently put out to remind businesses of what could happen when PPP funds are improperly used. Now is the time to correct, amend, or make changes to any information deemed necessary to report to the IRS to avoid penalty and risk of having to claim taxes on the loan amount distributed as income tax.
Next Steps for the EIDL
While there is no option for the forgiveness of the EIDL, qualified businesses need to keep up to date on when their payments begin, are due, and if any status changes have been made. This loan amount comes with varying levels of detail including how it is spent, documentation for the amount used and when, and more. To keep up to date on this loan, remind your clients to visit the SBA website to check on it.
If unsure of what steps need to be taken in order to avoid any major penalties, remind business owners to reach out to you for verification that their status and tax information is accurate and relevant.