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.
Steve Pinado is the president of Billtrust and is responsible for leading the company's sales, marketing, business development and customer success departments. He has more than 20 years of experience as an executive in corporate strategy, business development, mergers and acquisitions, finance and organizational development.
Joe Alim is the VP of Product and Operations at Compt, the number one employee stipends platform that gives people the freedom to choose the lifestyle perks they really want. He is currently focused on ensuring the HR tech startup offers an amazing customer and product experience so that providing and utilizing perks is fun, easy, and gratifying for companies of all sizes and stages. Prior to his current role, Alim co-founded the talent-tech startup, ScholarJet, which he also led as COO. His commitment to building a better future of work begins with improving the employee experience through personalization. He's excited to share his knowledge on scaling benefits and designing successful stipend programs.
With more than 30 years of experience championing causes that inspire social change through sports, entertainment, and pop culture, Lou Raiola is the industry's go-to resource when it comes to uniting stakeholder groups in collective efforts to drive positive social impact. He is also a leading advocate for the adoption of ESG within all types of organizations and is a leading expert on ESG strategy for supply chain stakeholders often speaking on the topic he describes as "The ESG Ripple Effect".
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.