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.
Brian Maslen, MBA, CPA, CMA, serves as the corporate controller at Center. Based in Bellevue, Washington, Center develops CenterCard and Center Expense, an integrated corporate card and expense software solution that use real-time data to help monitor expenses and optimize spend. As Center’s controller, Maslen is responsible for the accounting, tax, and treasury functions. He also leads product initiatives to ensure Center’s software meets the needs of finance professionals, building off his prior experience in Accounting/FP&A roles at Blackberry and Owens Corning.
Large retailers like Walmart Inc. and Target Corp., as well as student loan borrowers, are on a long list of potential winners from tax breaks included in a $2 trillion coronavirus relief bill approved by the Senate.
Idaho Gov. Brad Little's order telling Idahoans to stay home for 21 days is likely to create havoc for the state's real estate industry.
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.