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.
The U.S. Chamber of Commerce and other organizations are sounding the alarm about the impact of President Trump’s order.
Kirstin Marr is the Chief Analytics Officer at Insurity, a leading provider of cloud-based core system solutions and data analytics for the world's largest insurers, brokers and MGAs. Previously, Marr was the president of Valen Analytics and one of the pioneers of the Insurance Careers Movement coalition, a grassroots initiative of more than 1,000 insurance organizations raising awareness of what insurance has to offer millennials. Before Valen, Marr ran B2B marketing for internet technology pioneer and market leader ServiceMagic.com (now HomeAdvisor). She has a passion for building companies that invent leading-edge technologies to improve customers' lives and solve the inefficiencies that exist in traditional marketplaces.
Gerard Griffin is CEO and founder of AnyDay, the world’s first vertically integrated provider of end-to-end earned wage access and other financial wellness solutions. Thanks to the payments infrastructure of its parent QRails, the AnyDay platform enables payroll processors, human capital management companies, workforce management providers, and large corporations to deliver instant payment of earned wages to employees at low to no cost.
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.