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So has anyone had recent discussions with clients on the issue of taxes and PPP loan forgiveness? I've encountered two clients who had read in several places that when the PPP loan is converted to a grant, it is not treated as taxable forgiven debt. But they failed to read further and find that the IRS position is that the expenses paid with these same funds are not deductible. Even when we tell them about IRS Notice 2020-32, they aren't likely to read it. And unless Congress acts, they will wind up paying taxes on the forgiven debt anyhow. I've tried several approaches in explain this, but am still not satisfied with how clear I am being. And having to introduce the uncertainty based on whether Congress acts to clear this up just makes things even more confusing. (It's a much worse problem than trying to make a restaurant owner understand why they can't take a tax deduction for food they discard. ) I guess this falls into under the heading that "It's hard for a man to understand something if understanding it will cost him money." I sure hope Congress gets busy at some point (either pre-election or post-election), and provides some clarity on this important issue.

I'd probably try the "paid with money not earned or generated by your business" or "the gov't footed the bill, no deduction." If that doesn't work, try "no deduction, it's the law, end of story."

Yes. I do this with K1s from partnerships in DC. I amended 3 years of MD returns prepared by an expensive DC law firm and got my new client back nearly 30k in MD refunds. But in the case of K1s, or other businesses, if the business deducted the DC tax as an expense, you have to also add the amount of tax deducted from the business income, as a MD addition to income. But you come out way ahead with the credit

From the payroll side. Draw could have more than one meaning. Could be an advance against wages, would be withdrawal of (hopefully) profit by owner. Assuming the intent/requirement is to be paid as an employee, then if there are funds available, employee(s) (owner or not) need to be paid at least minimum wage for all time worked. Owner/employees need to meet the reasonable wage parameters. Pay frequency must meet state regulations (if any), so monthly may or may not be an option. If this is the first paycheck the business is to create, then there needs to be consideration to the other issues, such as making sure a UI account is in place, WC insurance, payroll posters in place, W4, I9, etc. Given the knowledge funds will be short, I would suggest not holding any withheld taxes, and depositing with every payroll. (Good advice for most businesses, since there is little to gain on the float, much to lose on not remitting on time, and reconciliation costs are less.) <soapbox>Big miss for many owner/employees is remembering to treat the employee part of the process as if it was a stranger and comply with all regulations for any employee. No "I want to withhold this", and instead, withhold based on the last valid W4 received. No "pay themselves whenever and whatever they want, but collect time card information, pay as often as required via the posted pay cycle the business has, and for at least minimum wage - more if possible to meed reasonableness "tests". None of the one big paycheck a quarter or year shenanigans - since there will likely be use of the money (withdrawals) during the entire year. Interestingly, the owner/employee who does not do the above is usually not caught by a tax agency (assuming reasonable taxes are paid in some form), but are "caught" when they want or need to sell, or if they want or need to borrow against business or against income and struggle to quickly fudge up the books to show the proper results.</soapbox> If the funds run out, then the business needs to obtain more funds, or lay off the employees. (Owner/employees can sometimes claim UI.)

I am sure many lessons We are fairly like minded, which made the working relationship both easy and hard. The big lesson he shared with me is there is no such thing as an "accounting emergency". I have tried to apply this to as many things as possible, the "not an emergency" principle.

Me too. I see footnotes most often in email, about privacy and such things. Funny thing is, unless sent via some sort of scrambled secure email, the email must be considered public, so such notice is moot. It is public knowledge email providers, such as gmail, scan the content (to serve ads / make money), and "security/spam" vendors who do the same. Sometimes I ask those who send messages with such footnotes if they are aware any message they want to cover by privacy regs (230?) must be send scrambled and secure... and more often than not, they had not considered sending email via normal channels is not secure or private.