September 2, 2021

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How’s the PPP forgiveness going?

The Paycheck Protection Program (PPP) was supposed to be an easy way for small businesses impacted by the pandemic to get loans. Applicants had to use those loans to keep employees on the payroll, and then they could apply to have the loan forgiven. And while reasonable people can disagree over whether it actually was good policy, the fact remains that over 11 million loans worth $792 million were disbursed. 

So what about the forgiveness part? We noted last year that it was off to a rough start, and it’s still bumpy for some, while many others are yet to find out:

[S]o far, 6% of borrowers who have applied for forgiveness have been told they must pay back some portion of their loans, according to the Small Business Administration — adding up to more than $27 billion. Meanwhile, half of borrowers have yet to finish the forgiveness process.

I think there’s a couple of ways to look at this: 1) Cool, only 6% of borrowers need to pay back a portion of their loans; or 2) Uh oh, 6% of borrowers need to pay back a portion of their loans. A lot of the excitement around PPP had to do with the perception that the loan forgiveness would be a given. The reality, of course, is that hastily conceived rescue legislation is rarely that cut and dry. 

Still, one of the success stories coming out of the pandemic was how accountants helped clients secure PPP loans by navigating all the Byzantine rules and paperwork. But since the program stopped making loans this past May, the question of what firms will do post-PPP has been something we’ve talked a lot about. But perhaps that discussion has been premature. With 6% of businesses having to pay back part of their loans and half still working through the process, there’s still plenty of PPP consulting left to be done! It’s a pandemic miracle! 

Okay, not really. It was pretty clear from the start that the forgiveness aspect of the PPP was going to be tricky. Someone from the Small Business Administration even said as much: 

“It felt, I imagine, for borrowers that there was a bait and switch underway, where the promise was forgiveness. But the practical reality of the agency’s rules regarding forgiveness were incredibly complex and scary,” said Patrick Kelley, who has been associate administrator of the SBA’s Office of Capital Access since March.

Fortunately, accountants deal with complex and scary stuff all the time (e.g., tax code, ASC, etc.). In fact, I’m surprised more firms don’t have marketing campaigns around it. 

“We’re CPAs. We handle the complex and scary stuff. Let’s get your PPP loan forgiven.” This is a winning campaign that you could run for the foreseeable future. Believe me, I’m as surprised as you are that this newsletter now includes free marketing consultations.

Regulating tax preparers

Elsewhere, the IRS is looking to regulate tax preparers (again): 

Internal Revenue Service regulation of return preparers, sidelined since its prohibition by the Loving decision, is back for another try.

The IRS, responding to years’ of urging by tax preparer groups and by its own concern about the performance of paid preparers, issued regulations in 2011 that required paid tax return preparers to pass an initial certification exam, pay annual fees, and complete at least 15 hours of continuing education courses each year. The IRS relied on 31 U.S.C. Section 330, enacted in 1884, which authorized it to regulate the practice of representatives of persons before the Department of the Treasury.

“Loving” is Loving v. Commissioner, which basically said that the IRS overreached in its attempt to regulate tax preparers. So this time around, there’s legislation introduced that would set minimum standards for tax preparers and give the IRS explicit authority to regulate them. That includes reinstituting the 2011 program which had a competency exam and required continuing education. I don’t know if we can go so far as to say that this would amount to a federal license to prepare tax returns, but it’s close.

Anyway, this all stems from the general worry that tax preparers, as a general rule, don’t need a license to practice (seven states require a separate credential). In other words, a non-CPA, non-enrolled agent, non-attorney who simply enjoys punching out 1040s can open a business preparing tax returns. Sure, they have to fill out all the necessary paperwork and file it with the state or other jurisdiction as is required of any business. And, yes, you need a preparer tax identification number (PTIN), but you don’t need a specific license. 

It’s a little weird! It’s especially weird when you consider all the other jobs that do require licensure. There are the obvious ones like doctors, electricians, and teachers. But also the obscure things like auctioneers, interior designers, makeup artists, and in Louisiana, for example, retail florists have to be licensed.

But tax preparers don’t need a license? That means any stranger can walk into the office of an uncredentialed tax preparer, with all of their tax information for the year, including their Social Security number, bank account, address, the names of their spouse and dependents and their Social Security numbers, and ask you to prepare their tax return. Then you, a professional tax preparer person, can demand payment for preparing that return. Or you could take all that information, along with all the information you’ve collected from unsuspecting people who want their tax returns prepared, and file a bunch of fake returns requesting big refunds and blow out of town.

So I get why the IRS would want some oversight. It’s just a little strange that they haven’t had it all this time. It’s also super strange that a person in Baton Rouge can’t sell you a bouquet of long-stemmed roses without a license but could whip up your tax return with no issue at all. 

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Caleb Newquist Caleb is Editor-at-Large at Gusto. In 2009, he became the founding editor of Going Concern, the one-of-a-kind voice on the accounting profession, serving in the role for 9 years. Prior to Going Concern, Caleb worked as a CPA for nearly 6 years in New York and Denver. He lives in Denver with his wife, two daughters, and two cats.
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