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 COVID-19 pandemic has changed us in ways that are still undetermined.
Tosha Anderson of The Charity CFO shares the strategies that not-for-profit organizations are taking to weather COVID-19.
Art Dickerson is a seasoned business development executive with decades of experience and understands motivation of customers and influencers critical to Catapult’s success. He was a trusted advisor for twenty years to large/jumbo employers at leading firms like E&Y and Mercer. Dickerson was also a senior vice president of sales and marketing and chief strategy and operations officer for the national accounts arm of the Blue Cross Blue Shield system (Consortium Health Plans).
Besides deep experience in strategic selling and sales management, Art is a Certified Employee Benefit Specialist with multiple insurance licenses. He earned a Bachelor of Science in Commerce degree at the University of Louisville and studied executive financial management at Babson College.
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.