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.
With over a decade of experience in IT, digital transformation and program management, Kristy Lovegrove currently leads as Group Head of Technology at Pro Global, a role she has held since December 2020. Her expertise spans cloud-based project delivery, hybrid cloud transformations, FCA-compliant rollouts, and advanced data solutions including robotic process automation and full application transformation.
Alex Astengo is UK country manager for Root and has significant experience working for SaaS platform-based businesses, which offer solutions to insurers, MGAs and brokers. In his role at Root, Alex is developing Root's UK presence with the aim of becoming the go-to platform for insurance businesses intent on growing their digital offering.
Mazi Bahadori is the chief operations officer at Altruist.
A seasoned veteran in financial technology, he previously served as the CCO and director of operations for Aspiration. Prior to this, he worked for PIMCO as VP of Legal and Compliance, for Morgan Stanley as a financial advisor and for Goldman Sachs as a government affairs associate.
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.