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.
Andrew Metz has been working in a SaaS sales capacity for over 15 years. In his career he has climbed the corporate ladder from a BDR to a vice president of sales, overseeing a 100-person sales team currently at Zywave (SaaS Insuretech leader). He has developed new leaders within the sales organization and has personally hired over 200 sales professionals.
Andrew frequently guest lectures to business students at the University of Marquette. He also presents for the MBA program at the University of Wisconsin-Milwaukee several times a year. Andrew is also an active content creator on LinkedIn and has created multiple viral posts, with millions of views. He currently has an audience of over 15,000 LinkedIn followers.
Itamar Romanini is vice president and general manager of HSA Store and a long-time leader and innovator in consumer-directed healthcare and HSAs. HSA Store is part of the Health-E Commerce family of brands, which also includes FSA Store, WellDeservedHealth and Caring Mill.
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.