PPP and Guaranteed Payments to Members

[miklb582]

Our 2 Member llc files as a Multi-Member Partnership using Form 1065.

The PPP funds are non-taxable, and the payroll to our employees is a deductible expense.

However, I can't wrap my head around this part. Do the member draws of PPP funds to members get included into the Guaranteed Payments in TT Business?

[JeffreyR77]

Yes, see this explanation from dd4vols this spring PPP Included in Guaranteed Payments?

[miklb582]

@JeffreyR77 

Thank you for taking the time to assist. However I'm not sure this answers my question.

That link pretty much described how calculate owner compensation, and how to record/use the funds.

What I am specifically asking is if those member draws/guaranteed payments are to be reported as such.

If the PPP funds are to be considered non taxable, it seems to me that the PPP funds used for owner compensation as guaranteed payments being reported to the IRS as guaranteed payments, I am being taxed on the funds.

[JeffreyR77]

You are correct.  You (a member receiving a guaranteed payment) are being taxed on the amount of PPP funds to the extent they are used for the purpose of guaranteed payments as employees would have been taxed on their income if those funds were used to pay wages. 

With the exception of the guaranteed payments, the LLC members are not being taxed on the balance of the PPP funds.  The PPP funds are to be considered non-taxable to the entity, not to the recipients that receive payments using those funds.

[miklb582]

@JeffreyR77 

Thank you again.

While it makes sense now, for some reason I wasn't thinking it through clearly, and you helped in clarification on the subject!