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.
Mark Detrick co-founded Capio in 2008 and has been the chief executive officer since 2013, previously serving as the chief financial officer.
Brooke DeWyze is the Chief Development Officer for PCF Insurance Services. She is responsible for driving M&A strategy, forging industry partnerships, enabling acquisition growth, and cultivating relationships with prospective agencies and key stakeholders. Brooke also leads due diligence processes.
Casey Jorgensen is the head of the Dynasty Institute for Adaptive Leadership (DIAL) at Dynasty Financial Partners, where she helps leading wealth management firms improve efficiency, growth and margins.
She played a key role in expanding DIAL's programs and the Dynasty Women's Network. Previously, she was a business development strategist at Raymond James, focusing on advisor coaching and succession planning. Her insights have also appeared in Barron's and AdvisorHub, and she's a frequent speaker at industry events. She is also active in her community and holds a BA in business administration, CFP, whole family advisor associate and registered corporate coach designations.
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.