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.
John G. Bruno serves as Aon’s Chief Operating Officer as well as Chief Executive Officer of Aon’s Data & Analytic Services Solution Line, which includes the firm’s technology-enabled Affinity and Human Capital Solutions businesses. Bruno joined Aon in September 2014 and has served in several leadership positions with increasing responsibility including Executive Vice President of Enterprise Innovation & Chief Information Officer and Chief Operations Officer & head of Aon Business Services.
Prior to joining Aon, Bruno was Executive Vice President, Industry & Field Operations and Corporate Development for NCR Corporation, where he led all of NCR’s lines of business inclusive of financial services, retail, hospitality, travel, telecom and technology, interactive printer solutions and small business.
Throughout his 30-year career he has held senior business and technology leadership positions with increasing responsibilities with Fortune 500 companies including United Parcel Service, Cisco Systems, Merrill Lynch and Goldman Sachs. Bruno currently serves on the Board of Directors for Global Payments
Amid the economic crisis, many people are looking for sources of cash and can no longer afford their insurance premiums.
Steve Shorrock is president of Veris Settlement Partners and LifeVentures Corp. He was previously president and CEO of Banker’s Life Insurance Co.
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.