Businesses get tax break on PPP loans, individuals still have to pay taxes on unemployment
BATON ROUGE, La. (WAFB) - More PPP funding is on the way including a fix that will help restaurants stay afloat.
Prior to this latest round of assistance, all PPP funds were taxable. In the new stimulus bill, Congress included a tax exemption for all forgiven PPP loans, meaning many small businesses will no longer be on the hook to the IRS come tax time.
The new bill, signed by President Donald Trump, allows businesses to deduct those funds.
Stephen Hightower who owns several restaurants around Baton Rouge, including Beausoleil, said that tax break allows many small businesses to continue weathering the pandemic.
“It’s paycheck protection so it was the ability to put people back to work, so if we had to go through the process of laying off people again it wouldn’t be good for our business but it’d be devastating for our economy,” Hightower said.
While the new bill offers assistance to people like Hightower, for his employees who had to rely on unemployment when his restaurants were shut down, they are still on the hook for the unemployment benefits they received.
“Employment compensation is a taxable income item,” said Brad Tate, senior tax manager for Hannis T. Bougeois. “It is treated under the internal revenue code as an income or wage replacement so if a person has received unemployment benefits they need to be ready to pay taxes on those.”
Tate said he does not believe that was made clear to those who filed for unemployment for the first time and worries many have not withheld the tax dollars they will owe come April 15th.
“The IRS offers quite a bit of flexibility if you can’t pay,” Tate said. They offer payment plans, I think things like that for the person who’s gotten themselves in a situation where they didn’t save, they didn’t have withholdings on compensation, they can get in an agreement with the IRS and pay that out over a period of time.”
The stimulus checks individuals received earlier this year, including the new $600 check that was approved by President Trump are tax exempt and Tate said you will not have to claim that as income.
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