CA PPP loan add back

Technical topics regarding tax preparation.
#1
Andrew  
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My client's income went up in 2020 over 2019. My client is a sole proprietor. My software doesn't address this. I have to add back the expenses paid with PPP loan for CA.
Where do I add back this amount? Which line on schedule CA adjustments? Thanks.
 

#2
EZTAX  
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California
Have you looked at it quarter by quarter?
 

#3
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Chicago, IL
I am not in CA nor am I a CA expert, but I just came across the same situation for a client of mine. If the PPP funds were used to pay personal expenses and were essentially treated as "owner replacement compensation" or whatever they were calling it, is an add-back even necessary?
 

#4
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Nightsnorkeler wrote:...is an add-back even necessary?


Yes. AB80 addressed this. https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=202120220AB80

For OP, your adjustment should show up on Sch CA, Part I-B, Line 3C...
 

#5
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I know I just can't let this go right now, it just doesn't make sense to me.

AB 80 says that if you don't meet the 25% reduction test, then AB 80 doesn't apply to you and you are bound by AB 1577.
AB 1577 says that expenses paid with forgiven PPP funds are non-deductible.

Am I wrong with either of those statements? If not, then why would a SE taxpayer who used the PPP money for personal expenses need to add-back anything? The PPP was used to pay already non-deductible expenses.

As I stated before I am not in CA and only do a handful of mostly simple CA returns each year so I am not trying to argue that I am correct. It just doesn't make sense to me.
 

#6
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I fully agree with you, I still do not understand...I guess I have let it go. I've not yet found a reasonable "Why?" myself -- other than a childish "Because. It just is!"

Through April then May and June, as this all was being codified I read, astonished, at the legislature's action on this...
 


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