The introduction of PPP loans provided a dose of good news and a welcome reprieve for thousands of business owners this year. In this unprecedented crisis full of unknowns, this economic stimulus gave many businesses the shot in the arm they needed to pay their employees and keep moving forward.
Even better news arrived when owners realized that the government would be forgiving most of these PPP loans, meaning that they wouldn’t have to repay these loans. Ever.
Now the IRS is hitting owners with some not so good news–PPP-funded expenses will likely not be deductible because the income associated with the forgiveness is excluded from gross income under the CARES Act. While not altogether surprising, this ruling is not set in stone.
The AICPA, for one, has indicated that they believe that the IRS’s interpretation denying deductions of expenses forgiven under the PPP program is contrary to Congress’s intent. Time will tell whether Congress will provide direct guidance to the IRS on this matter.
We will keep an eye on this ever-evolving situation. Please check back regularly for updates, and as always, feel free to contact us to discuss your specific tax preparation needs.