Small businesses are in for a rude awakening at tax time

Treasury Secretary Steven Mnuchin speaking next to Jovita Carranza, the head of the Small Business Administration, at a White House briefing in Washington on April 2, along with President Trump and Vice President Pence.Doug Mills/NYT

Although I agree wholeheartedly with your Dec. 5 editorial “Bipartisan stimulus proposal is better than nothing. But it’s not nearly enough,” it’s missing a key point. The stimulus proposal package should also include language that clarifies Congress’s intent to make the forgiven Paycheck Protection Program loans deductible.

Senators Chuck Grassley, Republican of Iowa, and Ron Wyden, Democrat of Oregon, jointly have expressed their outrage at the IRS’s proclamation that these expenses will not be deductible, thus, in effect, making these grants taxable. That is clearly not the intent of Congress, and many members of the House and of the Senate have said so.

When owners of small businesses, who are just trying to make ends meet, file their income tax returns next year, they’ll be in for a rude awakening. There will be an additional tax of $20,000 on a $50,000 loan, and twice that on a $100,000 loan. Where are these owners of small businesses — our local pizza shops, hairdressers, florists, convenience stores, service stations, retail shops, etc. — going to get the money to pay these unexpected taxes? That’s adding insult to injury. Most of these owners will not be prepared, nor will they be able to pay this additional tax.

So I’m asking readers to urge members of Congress to pass additional legislation to emphasize their initial intent with the Paycheck Protection Program. Otherwise, we may have another catastrophic episode of business closures and bankruptcies in the spring.

Herb Harris

Peabody

The writer is a tax professional who meets regularly with small-business owners to advise them.