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 Settlement Days program is trying out remote options in Detroit and Atlanta.
Many of the remote work practices we’re instituting today are likely to be part of a new normal that survives long after the current crisis has ended.
Jeff Phillips is co-founder and CEO of Accountingfly, the accountant hiring platform that matches firms with local and remote accounting talent. Phillips was previously with Monster.com, where he delivered recruitment solutions for Fortune 500 companies such as Verizon, H&R Block and Shell. He was named among the Top 100 Most Influential People by Accounting Today for four years. Phillips has a bachelor’s degree in economics from Baylor University and a Master of Business Administration from Southern Methodist University. Phillips lives with his family in his hometown of Pensacola, Florida.
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.