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.
Michele Harbaugh has been a human resource professional for more than 20 years and currently manages health and benefits for Yoga Joint, which operates eight yoga studios across South Florida. Michele's professional dream is for employees to see human resources as a tool for them, not the dreaded "principal's office". She does this through actively engaging the team, having open and honest conversations, and interpreting policies into everyday language. She is on a mission to put the human back in human resources, help employees thrive at their workplace, and contribute to the company's overall growth.
Dr. Dave Rengachary is Senior Vice President and Head of Underwriting for U.S. Mortality Markets at RGA Reinsurance Company, where he has served instrumental roles in setting the risk philosophy for the department, oversight of US Manual development, leadership roles across numerous USMM underwriting initiatives and regulatory engagements. He previously served as Chief Medical Director for RGA
Prior to joining RGA in 2013, he was a general neurologist in practice at Missouri Baptist Medical Center where he also served as medical director for their Primary Stroke Center. Dr. Rengachary attended the Honors Program in Medical Education at Northwestern University. He then completed an adult neurology residency at Washington University followed by a fellowship in Clinical Neurophysiology. He serves on the board of directors of Memory Home Care Solutions and Oasis, non-profit organizations respectively dedicated to Alzheimer's caregiver support and healthy aging. He has obtained board certification in neurology, insurance medicine, FALU, and FLMI. Dr. Rengachary recently received his executive M.B.A. through the program at the Olin Business School at Washington University.
In 2021 Dr. Rengachary accepted a position as chair of ACLI's Risk Classification Committee. He is Past-President of the Midwestern Medical Directors Association; current Deputy Director of the Longer Life Foundation; Medical Consultant for the Academy of Life Underwriting; and a past member
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.