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 Financial Reporting Council issued guidance Tuesday about the disclosure of risks surrounding the coronavirus, and is discussing with audit firms whether the virus will affect their ability to review audits in China.
Dynamic IT Executive with more than 15 years’ experience leading teams and C-level management through process improvement and organizational development initiatives in well-established and growing firms. Visionary leader and expert in all facets of technology strategic planning, resource management, analysis, documentation, development, and deployment across the breadth of enterprises. Pioneering Project and Program Manager with experience managing multimillion dollar engagements for noteworthy, multinational companies. Adept at communicating complex technical terms to non-technical individuals. Insightful communicator with exceptional interpersonal skills, capable of establishing lucrative and significant relationships with clients, peers, and superiors.
For the past twenty-plus years, Tony Wicke has held numerous leadership roles in the mortgage and banking sectors. He is currently the Executive Vice President of Retail Lending for Land Home Financial Services, Inc., a privately held Independent Mortgage Banker founded in 1988. In his role, Tony oversees all facets of Retail Lending for the company. He is passionate in the pursuit of simplifying the mortgage experience for Land Home’s customers and enjoys making what is often the largest purchase of a customer’s life, less daunting. When not in the process of transforming the direction of LHF, you will often find him with his family somewhere outdoors whether that is on the ice rink, at the lake or going down the mountain.
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.