IMPORTANT UPDATE TO PAYROLL PROTECTION ACT LOANS AND FORGIVENESS
The Treasury Department and the IRS weighed in again on the taxability of the Payroll Protection Act Loans. Guidance was released Wednesday clarifying that the expenses used for the loan are not deductible in the year paid or incurred whether or not a business has filed for forgiveness if there is a reasonable expectation forgiveness will granted. The good news is the proceeds from the loan are still not taxable, however, the expenses associated will be disallowed
To protect businesses who do not subsequently receive forgiveness, the IRS put a safe harbor in place to allow the recovery of the deduction by claiming the expenses:
- On the 2020, taxable year timely filed (including extensions) original income tax return.
- Through an amended 2020 taxable year income tax return.
- On the income tax return in a year subsequent to the 2020 taxable year.
Please contact us if you need assistance with your forgiveness application or have questions regarding the impact of this update.