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.
Molly Minnick, RN, BSN, is a Personal Health Advocate at Health Advocate specializing in supporting working caregivers with education, resources, and emotional support. She has previously worked with Penn Palliative Home Care, Eternally, and the Rosalyn Carter Institute for Caregivers, adding to her experience helping individuals navigate advanced care planning. Minnick earned her Bachelor of Science in Nursing from Villanova University and is currently pursuing certification as a Certified Dementia Practitioner and an Aging Life Care Manager.
Keri Robertson, D.O., is a Medical Director at Health Advocate and has more than 15 years of healthcare management experience with a strong track record of enhancing patient experiences and outcomes. Dr. Robertson trained and worked in Chicago as an emergency physician and held progressive leadership roles, which gave her insight into how a person's health is affected by their ability to navigate and advocate for themselves. At Health Advocate, she leads a team of Personal Health Advocate Nurses who educate, engage and advocate to help members take steps toward better health and well-being.
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.