• Skip to main content
  • Skip to primary sidebar
  • Skip to footer

RJS LAW - Tax and Estate Planning

RJS LAW: San Diego Tax Attorney | IRS | FTB | CPA | California

Header Right

SOUTHERN CALIFORNIA’S FINEST
LAW FIRM

COMPLIMENTARY CASE EVALUATION

SAN DIEGO
(619) 595-1655
El CAJON
(619) 777-7700
  • Home
  • About
    • Ronson J. Shamoun, ESQ., LL.M.
    • Chandara Diep, ESQ., LL.M.
    • Devon J. Arabo, ESQ., LL.M.
    • Brian M. Malloy, Esq.
    • Andrea Cisneros Valdez, Esq., LL.M.
    • Sam Imandoust, ESQ., LL.M
    • Lauren Suarez, ESQ., LL.M.
    • John I. Forry, Esq.
    • Martin Schainbaum, ESQ., LL.M.
    • Kaveh Imandoust, JD, MBT, CPA
    • Joseph Cole, ESQ., LL.M.
    • Christopher Engelmann, ESQ., LL.M.
    • Remy Hogan, Esq., LL.M.
    • Steve S. Mattia, Esq.
    • Dod Ghassemkhani, ESQ.
    • Vincent Renda, Esq.
    • Pedro Bernal, Esq.
    • Sabri P. Shamoun 1938-2023
    • Melanie M. Shamoun
    • Renae Arabo
    • Hilary Dargavell
    • Sandie Portilla
    • Lupita C. Torres
    • Jewell Cornejo
    • Kesia Belford
    • Danielle N. Misleh
    • Judith G. Jeremie, JD
    • Rebecca Shuman
    • Michael Lutzky, CPA
    • Gianna Iskander
  • Practices
    • Tax
      • IRS TAX MATTERS
        • IRS Appeals
          • IRS Appeals Process
          • Contesting an IRS Levy
          • Why Retain RJS LAW for IRS Appeals
          • 4 Tips For Navigating The IRS Rapid Appeals Process
        • IRS AUDITS
          • IRS Correspondence Audits
          • What are IRS Field Audits?
          • Initial IRS Compliance Center Audits
          • IRS Office Audits
          • What happens in an IRS Audit?
          • Taxpayer Rights Under IRS Publication 1
          • IRS Warns Taxpayers About Scam
        • NOTICES
          • IRS Notices
          • IRS Letters
          • FTB Notices
          • Avisos en Español
        • IRS Collections
          • Avoiding and Eliminating IRS Tax Liens
          • Collection Due Process Hearing
          • CP 501 – IRS Notice
          • Failure to file a tax return: What happens?
          • How the IRS calculates interest
          • How to get a tax levy released
          • ACS – Automated Collection System
          • IRS Collections Process
          • IRS Interest Abatement
          • IRS Revenue Officers
          • Jeopardy Assessments and Jeopardy Levies
          • National Tax Agencies
          • RJS LAW Approach to Collections
          • IRS Statute of Limitations on Collections
          • Streamlined Installment Agreements
          • Tax Penalty Abatement
          • Taxpayer Assistance Orders TAO
        • IRS Payroll Tax
          • Independent Contractor Reclassification Audits
          • IRS Forms 940 and 941
          • IRS Trust Fund Interviews
          • Payroll Tax Liability Payment Options
          • Trust Fund Recovery Penalties
        • IRS Wealth Squad
        • Offer in Compromise & Tax Settlements
          • OVERVIEW OF OFFER IN COMPROMISE PROCESS
          • The Offer in Compromise Process
          • Appealing an Offer in Compromise to the IRS
          • How does the IRS evaluate an Offer in Compromise
          • Offer in Compromise and Dissipated Assets
          • Offer in Compromise Requirements
          • Pros and Cons of an Offer in Compromise
          • Why Choose RJS LAW?
          • Offer in Compromise Alternatives
          • Actual IRS Offer in Compromise Results
      • STATE TAX MATTERS
        • EDD California Payroll Tax Lawyer
          • EDD Investigations
          • EDD Collections – Liens, Levies, and Garnishments
        • CDTFA – California Sales Tax
          • California Sales Tax Appeals
          • California Sales Tax Audits
          • California Department Of Tax And Fee Administration – CDTFA
        • California State Tax Matters – California Franchise Tax Board | FTB | EDD
          • California Residency Audits
          • Discharging State Income Taxes in Bankruptcy
          • State Tax Practice – Outside of California
      • CRIMINAL TAX ISSUES
        • Criminal Investigation Division
        • IRS Criminal Investigation Division Tactics
        • Criminal Tax Defense – Tax Crimes
        • Currency Transaction Records & Suspicious Activity Reports
        • IRS Methods of Proof: Tax Fraud and Evasion
        • Methods IRS Agents Use to Locate Assets
        • IRS Special Agent Visits
        • Are You a Criminal Investigation Target?
        • Criminal Tax Attorney vs. White Collar Defense
      • CORPORATE TAXES
      • TAX COURT LITIGATION
      • Innocent Spouse Relief
    • International Tax
    • Estate Planning
    • Trust Litigation
    • Trust, Estate & Probate Litigation
    • Trust & Estate Administration
    • Probate
    • Bankruptcy
      • Bankruptcy (FAQ’s)
    • Civil Litigation
    • Criminal Defense
    • Accidents & Injury
    • Corporate & Transactional
    • Private Wealth Services
    • Real Estate Law
      • Landlord Tenant Law
    • Employment Law
  • Tax Institute
    • 10th Annual USD School of Law – RJS LAW Tax Institute
    • 9th Annual USD School of Law – RJS LAW Tax Institute
    • 8th Annual USD School of Law – RJS LAW Tax Controversy Institute – July 28th, 2023
    • 7th Annual USD School of Law – RJS LAW Tax Controversy Institute – July 15th 2022
    • 6th Annual USD School of Law – RJS LAW Tax Controversy Institute
    • 5th Annual USD School of Law – RJS LAW Tax Controversy Institute
    • 4th Annual USD School of Law – RJS LAW Tax Controversy Institute
  • Testimonials
  • Giving
    • Giving
    • RJS LAW Donates Billboard to the Girl Scouts
  • Awards
    • Awards
    • Ronson J. Shamoun at events with various dignitaries
    • SD50 Extraordinary Leadership
    • Media
    • Video Gallery
  • Blog
  • Pay
  • Contact
  • en English
    • en English
    • es Español

WINNER OF THE UNION TRIBUNE SAN DIEGO'S BEST TAX LAW FIRM

 


9 YEARS

Call
Contact
Blog
  • Home
  • About
    • Ronson J. Shamoun, ESQ., LL.M.
    • Chandara Diep, ESQ., LL.M.
    • Devon J. Arabo, ESQ., LL.M.
    • Brian M. Malloy, Esq.
    • Andrea Cisneros Valdez, Esq., LL.M.
    • Sam Imandoust, ESQ., LL.M
    • Lauren Suarez, ESQ., LL.M.
    • John I. Forry, Esq.
    • Martin Schainbaum, ESQ., LL.M.
    • Kaveh Imandoust, JD, MBT, CPA
    • Joseph Cole, ESQ., LL.M.
    • Christopher Engelmann, ESQ., LL.M.
    • Remy Hogan, Esq., LL.M.
    • Steve S. Mattia, Esq.
    • Dod Ghassemkhani, ESQ.
    • Vincent Renda, Esq.
    • Pedro Bernal, Esq.
    • Sabri P. Shamoun 1938-2023
    • Melanie M. Shamoun
    • Renae Arabo
    • Hilary Dargavell
    • Sandie Portilla
    • Lupita C. Torres
    • Jewell Cornejo
    • Kesia Belford
    • Danielle N. Misleh
    • Judith G. Jeremie, JD
    • Rebecca Shuman
    • Michael Lutzky, CPA
    • Gianna Iskander
  • Practices
    • Tax
      • IRS TAX MATTERS
        • IRS Appeals
          • IRS Appeals Process
          • Contesting an IRS Levy
          • Why Retain RJS LAW for IRS Appeals
          • 4 Tips For Navigating The IRS Rapid Appeals Process
        • IRS AUDITS
          • IRS Correspondence Audits
          • What are IRS Field Audits?
          • Initial IRS Compliance Center Audits
          • IRS Office Audits
          • What happens in an IRS Audit?
          • Taxpayer Rights Under IRS Publication 1
          • IRS Warns Taxpayers About Scam
        • NOTICES
          • IRS Notices
          • IRS Letters
          • FTB Notices
          • Avisos en Español
        • IRS Collections
          • Avoiding and Eliminating IRS Tax Liens
          • Collection Due Process Hearing
          • CP 501 – IRS Notice
          • Failure to file a tax return: What happens?
          • How the IRS calculates interest
          • How to get a tax levy released
          • ACS – Automated Collection System
          • IRS Collections Process
          • IRS Interest Abatement
          • IRS Revenue Officers
          • Jeopardy Assessments and Jeopardy Levies
          • National Tax Agencies
          • RJS LAW Approach to Collections
          • IRS Statute of Limitations on Collections
          • Streamlined Installment Agreements
          • Tax Penalty Abatement
          • Taxpayer Assistance Orders TAO
        • IRS Payroll Tax
          • Independent Contractor Reclassification Audits
          • IRS Forms 940 and 941
          • IRS Trust Fund Interviews
          • Payroll Tax Liability Payment Options
          • Trust Fund Recovery Penalties
        • IRS Wealth Squad
        • Offer in Compromise & Tax Settlements
          • OVERVIEW OF OFFER IN COMPROMISE PROCESS
          • The Offer in Compromise Process
          • Appealing an Offer in Compromise to the IRS
          • How does the IRS evaluate an Offer in Compromise
          • Offer in Compromise and Dissipated Assets
          • Offer in Compromise Requirements
          • Pros and Cons of an Offer in Compromise
          • Why Choose RJS LAW?
          • Offer in Compromise Alternatives
          • Actual IRS Offer in Compromise Results
      • STATE TAX MATTERS
        • EDD California Payroll Tax Lawyer
          • EDD Investigations
          • EDD Collections – Liens, Levies, and Garnishments
        • CDTFA – California Sales Tax
          • California Sales Tax Appeals
          • California Sales Tax Audits
          • California Department Of Tax And Fee Administration – CDTFA
        • California State Tax Matters – California Franchise Tax Board | FTB | EDD
          • California Residency Audits
          • Discharging State Income Taxes in Bankruptcy
          • State Tax Practice – Outside of California
      • CRIMINAL TAX ISSUES
        • Criminal Investigation Division
        • IRS Criminal Investigation Division Tactics
        • Criminal Tax Defense – Tax Crimes
        • Currency Transaction Records & Suspicious Activity Reports
        • IRS Methods of Proof: Tax Fraud and Evasion
        • Methods IRS Agents Use to Locate Assets
        • IRS Special Agent Visits
        • Are You a Criminal Investigation Target?
        • Criminal Tax Attorney vs. White Collar Defense
      • CORPORATE TAXES
      • TAX COURT LITIGATION
      • Innocent Spouse Relief
    • International Tax
    • Estate Planning
    • Trust Litigation
    • Trust, Estate & Probate Litigation
    • Trust & Estate Administration
    • Probate
    • Bankruptcy
      • Bankruptcy (FAQ’s)
    • Civil Litigation
    • Criminal Defense
    • Accidents & Injury
    • Corporate & Transactional
    • Private Wealth Services
    • Real Estate Law
      • Landlord Tenant Law
    • Employment Law
  • Tax Institute
    • 10th Annual USD School of Law – RJS LAW Tax Institute
    • 9th Annual USD School of Law – RJS LAW Tax Institute
    • 8th Annual USD School of Law – RJS LAW Tax Controversy Institute – July 28th, 2023
    • 7th Annual USD School of Law – RJS LAW Tax Controversy Institute – July 15th 2022
    • 6th Annual USD School of Law – RJS LAW Tax Controversy Institute
    • 5th Annual USD School of Law – RJS LAW Tax Controversy Institute
    • 4th Annual USD School of Law – RJS LAW Tax Controversy Institute
  • Testimonials
  • Giving
    • Giving
    • RJS LAW Donates Billboard to the Girl Scouts
  • Awards
    • Awards
    • Ronson J. Shamoun at events with various dignitaries
    • SD50 Extraordinary Leadership
    • Media
    • Video Gallery
  • Blog
  • Pay
  • Contact

Leave a Comment

SBA PPP Loan – Misuse and Malfeasance

SBA PPP Loan

SBA PPP Loan

In March 2020, Congress created the Paycheck Protection Program (“PPP”) to support small businesses through the financial difficulties posed by the COVID-19 epidemic. One of the most attractive features of an SBA PPP loan is its ability to be converted into a grant if the recipient business owners uses the funds for allowable purposes.

However, if a PPP loan is used for purposes other than those described in the Coronavirus Aid, Relief, and Economic Security Act (CARES), the loan can be converted into a recourse liability. This allows the Small Business Administration (“SBA”) to seek recovery from the debtor and debtor’s assets for any portion of the loan used for unauthorized purposes. In addition, the loan will also no longer qualify for forgiveness.

What’s My Legal Liability?

To receive PPP funds, several certifications need to be made. Business owners and their authorized representatives must certify in good faith, several statements on the PPP loan application and submit tax documents attesting to them. These documents must also match those submitted to the IRS and must be true and correct in all material respects. Cases involving false assertions made on loan certifications or the knowing use of funds for unauthorized purposes may be brought under the False Claims Act. The federal government may pursue recovery of loan amounts and/or civil or criminal fraud charges. Making false statements to obtain forgiveness of SBA-guaranteed loans is punishable under several federal statutes, including: 18 USC 1001 and 3571 by imprisonment of not more than five years and/or a fine of up to $250,000; under 15 USC 645 by imprisonment of not more than two years and/or a fine of not more than $5,000; and, if submitted to a Federally insured institution, under 18 USC 1014 by imprisonment of not more than thirty years and/or a fine of not more than $1,000,000.

Regulatory Attitude – Optics Matter!

Signaling his newfound regulatory zeal, US Treasury Secretary Steven Mnuchin recently announced that any company which received a PPP loan of more than $2 million will be audited for compliance with the program’s terms before loan forgiveness is granted. One important thing for loan recipients to keep in mind is that optics matter for regulators. Prosecutors prefer to go after cases with clear evidence of excess spending and favoritism towards management. Loan applicants should be warry of spending PPP funds on disallowable expenses such as executive bonuses, excessive marketing expenditures, and travel. 

Fraud & How to Avoid It

Business owners who misuse PPP funds or commit fraud in their loan application certifications will be directed to repay funds by the SBA. Further, loan recipients who knowingly misuse funds for unauthorized purposes may be subject to additional penalties, such as charges of fraud. The first criminal fraud charges due to misappropriated PPP funds have already been brought in Rhode Island under U.S. v. Stanley. Although that case concerns a rather egregious instance of fraud, regulators will be on the lookout for more difficult, and likely more common, cases in the coming months. The Stanley case is particularly egregious due to charges of bank fraud brought against the defendant, criminalizing his attempts to obtain payroll funds from the SBA for the payroll of “shadow employees”. Loan applicants should keep in mind that 75% of PPP funds must be applied strictly towards payroll costs, which also includes peripherally related employee expenses such as pension payouts and medical plan funding. The remaining 25% may be used to cover allowable non-payroll costs such as rent, mortgage payments, and utility expenses. 

Expectations of Enforcement

PPP enforcement actions will likely mirror those taken by regulators for recoveries of misappropriated Troubled Asset Relief Program (“TARP”) funds. Much like the PPP, TARP was created by Congress to stabilize the country’s financial system after the 2008 financial crisis. Businesses must keep in mind that even small technical mistakes on applications during emergency periods can potentially be interpreted as fraud, even years after the receipt of funds. Applicants for PPP loans should therefore exercise the upmost precaution to ensure the accuracy of their loan applications and the actual use of funds.

Best Practices

To avoid reprisals from the SBA, loan recipients should be documenting the use and allocation of PPP funds. It may also be a good idea to segregate COVID-19 relief funds from all other business-related accounts. Having PPP funds apart in a separate bank account can help auditors more clearly trace the use of loan proceeds.  

Published by Arin Nahapatian

About Us


Filed Under: CARES Act, PPP Loan

RJS LAW

Reader Interactions

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Primary Sidebar

Subscribe To RJS LAW

Email Address

Contact Us

  • This field is for validation purposes and should be left unchanged.

Recent Posts

  • U.S. Withdrawal from the Global Minimum Tax: Implications for Multinational Compliance and International Tax Stability
  • Understanding the Proposed $5 Million “Gold Card” Visa and Its Implications for High-Net-Worth Immigrants
  • Is the Gold Card Visa Legal? A Breakdown of the Proposal’s Path Through Congress

Categories

  • Advance Child Tax Credit
  • Asset Protection
  • Bank Fraud
  • Bankruptcy
  • Bankruptcy Attorney
  • Bankruptcy Laws
  • Beneficial Ownership Information
  • Bypass Trust
  • California AB5
  • California Payroll Taxes
  • California Sales Tax
  • Cannabis Tax
  • CARES Act
  • Cash Payments
  • Charitable Trust
  • Child Tax Credit
  • Company News
  • Contractor vs Employee
  • Contracts
  • Coronavirus
  • Court Settlements
  • COVID-19
  • CP14 Notice
  • CP504
  • CP504B
  • Cryptocurrency
  • Cryptocurrency Taxes
  • Digital Assets
  • E-Commerce
  • Economic Stimulus
  • EDD
  • EDD Audit
  • EDD Audit Penalties
  • Employee Retention Credit
  • Employment Law
  • ERTC
  • Estate Planning
  • Estate Planning Litigation
  • Excise Taxes
  • Exemption Planning
  • FBAR
  • FBAR Penalties
  • FBAR Reporting
  • Filing Bankruptcy
  • Financial Reporting
  • FinCEN
  • Foreign Bank Account
  • Foreign Bank Accounts
  • Form 105
  • Form 5471
  • Form 8300
  • FTB Audits
  • FTB Collections
  • FTB Issues
  • FTB Penalties
  • Gambling Tax
  • Gaming Losses
  • Gereration Skipping Trusts
  • Gold Card Visa
  • Guardianship
  • Hiring a tax attorney
  • Homestead Exemption
  • How to Declare the Child Tax Credit
  • How-To Legal Advice
  • Inflation Reduction Act of 2022
  • Intellectual Property
  • International Tax
  • International Tax Attorney
  • International Tax Law for Non-Profits
  • International Tax Reporting Requirements
  • IRS
  • IRS Appeals
  • IRS Audits
  • IRS Collections
  • IRS CP14 Notice
  • IRS Deadlines
  • IRS Form 8833
  • IRS Forms Explained
  • IRS Issues
  • IRS News
  • IRS Notice of Tax Lien
  • IRS Notices
  • IRS OVDI
  • IRS Penalties
  • IRS Website
  • Jobs Act
  • Levies
  • Liens
  • Lottery Taxes
  • Mail Fraud
  • Masters in Taxation – LL.M.
  • No Worries ®
  • Offer in Compromise
  • Opportunity Zone
  • Penalties for Filing Late
  • PPP Loan
  • Probate
  • Property Tax Assessment
  • Proposition 19
  • Publicly Traded Partnership
  • Required Minimum Distribution
  • Restaurant Sales Tax
  • Retaliation Claims
  • Retirement
  • Revocable Trust
  • Rewards Program
  • RJS LAW In The Community
  • Sales Tax
  • Sales Tax Audit
  • San Diego Law Firm
  • SBOE Audits
  • SBOE Issues
  • Self Employment
  • Small Business
  • Stock Buyback
  • Stock Options
  • Stock Repurchase
  • Streamlined Procedures
  • Student Loans
  • Tax and Vice
  • Tax Attorney
  • Tax Brackets
  • Tax Controversy Institute
  • Tax Credit
  • Tax Cuts
  • Tax Deduction
  • Tax Deductions
  • Tax Delinquency List
  • Tax Gap
  • Tax Institute
  • Tax Law
  • Tax Liens
  • Tax on Social Media Influencers
  • Tax Penalties
  • Tax Planning
  • Tax Rates
  • Tax Tips
  • Taxation of Rewards
  • Taxes
  • The American Rescue Plan Act of 2021
  • Third Party Settlement Organizations
  • Trust
  • Trust Litigation
  • Trusts
  • U.S. Supreme Court
  • Uncategorized
  • Unemployment
  • USD School of Law – RJS LAW Tax Controversy Institute
  • Vape Taxes
  • W-8 Forms
  • Wage Garnishment
  • Wills

Footer

Legal Resources

  • Payments
  • Services
  • Tax Law Blog
  • Video Gallery

SAN DIEGO

Map & Directions
FREE Underground parking in building

303 A Street
Suite 400
San Diego, CA 92101

Phone No.
(619) 595-1655

El CAJON

Map & Directions

900 N. Cuyamaca St., Suite 101
El Cajon, CA 92020

Phone No.
(619) 777-7700

RJS LAW Tax

Areas We Serve

– Del Mar
– Coronado
– La Jolla
– La Mesa
– Chula Vista
– Escondido
– San Marcos
– Carlsbad
– Oceanside

 


©2025 | RJS LAW Firm | All Rights Reserved | Privacy Policy