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.
Biju Nair is general manager and vice president of payments for Boulevard.
Mike Reeves is VP, Life Solutions, for Hannover Re Group, He has been with the company since 2007. Mike is responsible for new business development, client relationship management and implementing customized solutions for hr | ReFlex, Hannover Re’s automated underwriting system. His main focus with Hannover Re has been in the area of automated and accelerated underwriting, including finding and vetting new data sources to support automated and accelerated underwriting. Mike’s previous speaking engagements include various topics on innovations in underwriting solutions specific to how to successfully implement these tools into life insurers’ new business processes. He has 20+ years of combined experience in life and health insurance and reinsurance.
Almost half of employees have filed a complaint to HR during the pandemic due to employee disputes and other remote work issues.
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.