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.
Dr. Janell Straach has a diverse background that includes academic and industry experience. She holds a Bachelor of Science degree from Angelo State University, a Master of Computer Science degree from Texas A&M University, an MBA from The University of Dallas and a PhD from The University of Texas at Dallas. Prior to her current assignment with the UT Dallas Department of Computer Science, she worked for IBM and a Texas-based utility organization.
Michael Cramp is an experienced security researcher with a demonstrated history of working in the computer and network security industry. He is skilled in a variety of programming languages including C, Android, IDA Pro, Reverse Engineering, and Linux/Android kernel exploit development. He holds a Bachelor's degree focused in computer science from University of California, Santa Barbara.
Michele Norton, MS, RN is senior vice president of healthcare strategic marketing at SCIO Health Analytics an EXL Company. She has more than 20 years of experience in healthcare, including at health systems, providers, ACOs and payer organizations.
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.