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.
Austin Talley, Founder and CEO of Everyware, is passionate about connecting with people and providing excellent customer satisfaction through innovative payment and communications solutions. He has over 20 years of experience in developing new businesses, leading sales teams, increasing market share, and growing the bottom line. Launched in 2015, his company provides services to more than 9,000 merchants across multiple verticals including healthcare, travel, utilities, not-for-profit, and automotive. The platform offers a simple, fast, and secure way to move money while enhancing the ability for merchants to communicate with their customers in real-time with text messaging. It saves them money by improving cash flow and reducing paper billing costs, chargebacks, and fraud. For more information about Everyware, visit Everyware.com or follow on Facebook, Twitter, Instagram and LinkedIn.
Michael Chu is the Vice President of Design and Production at Arizent. A multidisciplinary creative, he leads the Brand Studio's award-winning team of designers and producers. He has led re-branding and design initiatives through thoughtful and strategic storytelling and is dedicated to delivering impactful and emotionally compelling experiential design across all Arizent's brands and channels.
Michael's work has earned him and the Brand Studio recognition through prestigious awards such as The Folio: Eddie & Ozzie and Jesse H. Neal. For the second consecutive year, under Michael's leadership, the Brand Studio has been honored as the Design Team of the Year at The Folio awards for both 2023 and 2024. Previously, Michael has collaborated with top brands including Chanel, IBM, Nikon and Hasselblad.
He graduated with honors from the School of Visual Arts (SVA) with a B.F.A. degree in Photography. Outside of work, Michael is an avid cyclist who has scaled the mountains of Mallorca, Seoul, Barcelona, Tokyo and other locations around the world.
Adrienne Penta is a principal of Private Banking and executive director of the Brown Brothers Harriman Center for Women & Wealth.
She led the creation of the CW&W, which supports women as they create and manage wealth and seeks to create a dynamic and inclusive environment where women can engage in conversations about wealth, family, and values. She also oversees Private Banking Marketing and Sales Enablement for the firm.
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.