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.
As the company’s chief product and technology officer, Nag is responsible for the execution of Duck Creek Technologies’ current and emerging product roadmaps while ensuring the adoption of proven software development patterns, architecture standards and frameworks. He is a senior IT leader who loves to work in the intersection of diversity of people and what they bring to work, ways of working, infrastructure, and different technology landscapes.
Darren Wood is the founder and president of Recoop Disaster Insurance, a first-of-its-kind, multi-peril disaster insurance product.
Darren is an insurance industry veteran, with over 25 years of experience. He previously served as the division president for Holmes Murphy, a top 25 insurance broker, where he was responsible for the delivery of value-added solutions to insurance clients. He also held senior project management and operational leadership roles with Marsh Consumer (now Mercer), focusing on the delivery of employee benefit and affinity solutions to consumers through Fortune 1,000 clients. Darren received his degree in Accounting from Simpson College, earned his Project Management Professional (PMP) designation and is a veteran of the United States Army.
Rachel is one of the premier leading insurance professionals with over ten years of experience in the industry. After launching her career as a management liability underwriter at AIG, she spent several years as a client advisor for the Financial Institution Group at Marsh. Rachel advised on risk management for the world's largest banks, insurance companies, asset managers & funds. Since joining the Founder Shield as a Senior Account Executive in 2017, she now leads the Customer Success team. Rachel focuses on client advising, improving policy language for venture-backed companies, including financial institutions, ecommerce, and SaaS companies, and developing new tech to continue driving innovation in the insurance industry.
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.