May 1, 2020
The Hill reported late last night that the IRS released guidance stating that expenses related to forgivable loans through the Paycheck Protection Program (PPP) won't be tax-deductible.
Under the PPP, small businesses might not have to repay the low-interest loan they received if the loan went to essential expenses such as maintaining payroll and headcount.
Usually, wages are deductible expenses and forgiven debt counts as taxable income. But under the coronavirus relief law, the PPP loan forgiveness is not counted as taxable income. The IRS said in its guidance yesterday that expenses that result in forgiveness of a PPP loan are not tax deductible in order to prevent a "double tax benefit."
The IRS cited Section 256 of the tax code, which states that deductions can't be taken if they are tied to a certain class of tax-exempt income. Congress could override the IRS's stance by passing a law that explicitly allows the deductions.
We will continue to monitor this and keep you abreast of changes.
Please visit our
COVID-19 Resource Page
for more updates.
Feel free to contact any member of our team at (610) 828-1900 (PA) or (732) 341-3893 (NJ) with questions. Rich Higgins, CPA, managing principal – New Jersey office can be contacted at
Richard.Higgins@MCC-CPAs.com
. I can be reached at
Marty.McCarthy@MCC-CPAs.com
. As always, we are happy to help.
Stay safe,
Marty McCarthy, CPA, CCIFP
Managing Partner
McCarthy & Company
Source: IRS: Companies Who Receive PPP Loans Will not Qualify for Tax Deductions. Marty Johnson. April 30, 2020. The Hill.
Disclaimer: This alert is for informational purposes only and does not constitute professional advice. Information contained in this communication is not intended or written to be used as tax advice, and cannot be used by the recipient to avoid penalties that may be imposed under the Internal Revenue Code. We strongly advise you to seek professional assistance with respect to your specific issue(s).
