Small businesses that manage to get their Paycheck Protection Program loans forgiven may find themselves losing valuable tax breaks, according to new guidance from the Internal Revenue Service.
Companies that qualify for loan forgiveness under legislation Congress approved won’t be able to deduct the wages or other businesses expenses they paid for using the loan, according to an IRS notice published Thursday.
“This treatment prevents a double tax benefit,” the agency said in the notice. “This conclusion is consistent with prior guidance of the IRS.”
The guidance clarifies a point of confusion in the $670 billion small business loan program to help businesses struggling as the coronavirus has brought the economy to a standstill. The law states that the forgiven loan won’t be taxed, but didn’t specify whether companies could still write off the expenses they covered with that money.
Michael Stuart is a behavioral healthcare leader with more than 30 years' diverse experience, ranging from executive management in large behavioral healthcare systems to teaching daily living skills to autistic children. Mike has worked with tens of thousands of people, with a focus on actionable, tangible steps to integrate health and wellness into everyday life. He specializes in teaching the importance of developing and utilizing a strong mindset to address and overcome health and wellness challenges, including addiction and mental well-being. As the Executive Director at AllOne Health EAP, he leads the team in delivering EAP and whole health benefits to organizations, employees and their family members.
During her college experience, Sara changed majors multiple times — and found it hard to retain what she was learning without being able to apply it to a specific career path. Upon graduation with her Associate's Degree, Sara was struggling to find a job and debated pursuing her Bachelor's, only to realize her peers with a four-year degree were also struggling in the job market. When she saw a TikTok advertising an opportunity to earn money while being trained for a successful tech career, without having to sit in another lecture hall, she knew she had to try it. Over a year later, she's a data analyst apprentice at Intermountain Health and championing apprenticeships for those who know college isn't their route to success.
The Reverend Luis Cortés Jr. is founder & CEO of Esperanza.
The tax code permits companies to write off businesses expenses, such as wages, rent and transportation expenses, but generally doesn’t allow write-offs for tax-exempt income.
The ruling adds to the list of stumbling blocks facing businesses as they try to qualify for the Paycheck Protection Program loans.
Small businesses have reported technical issues in trying to apply for the funds, which restarted Monday after the first round of funding ran out after just 13 days.
The program, run by the Small Business Administration, provides funds to cover eight weeks of payroll costs and the loans are forgiven if the employers keep workers on the job or quickly rehire laid-off workers.