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.
Chris joined Pie Insurance in May 2021 and is responsible for scaling and operating the Software Engineering organization that is responsible for building Pie’s technology products and services. Chris has spent most of his career working on technology designed to disrupt legacy industries such as healthcare and logistics. Most recently Chris served as CTO at NEXT Trucking where he was disrupting the commercial freight industry. Chris holds a B.S. in Physics from Indiana University.
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As Vice President of Insurance Operations at Jerry, Josh Damico integrates Jerry’s smart and fast car insurance customer experience with that of traditional carriers to help customers find savings and coverage. Josh’s nearly 20 years of insurance-industry experience and knowledge generate partnerships with more than 50 name-brand and specialty insurance partners that enable Jerry to serve customers with all types of vehicle and policy needs.
Josh also is responsible for Jerry’s live-call center support. The customer service representatives he leads help answer specific questions that ensure customers obtain the right policy at the best price.
Previously, Josh held executive roles at Geico, where he had vast regional oversight and leadership opportunities. In his most recent role as director of sales, servicing, and underwriting, Josh developed and executed profit and growth strategy for the New England states and New Jersey.
Josh holds a bachelor’s degree in business administration and management from Medaille College.
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.