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.
Stephanie serves Security & Risk Professionals. She leads a team of analysts who provide research and advisory services on topics like IT security frameworks; governance, risk, and compliance (GRC); identity and access management (IAM); application security; data… (Read Full Bio)security; and IT infrastructure security. She also provides Forrester's coverage of specific risk topics including business continuity, IT continuity/disaster recovery, and backup and recovery.Previous Work ExperienceStephanie has more than 12 years of experience in BC/DR, backup and recovery, and information storage industries. Prior to joining the Security & Risk team, Stephanie was a principal analyst on Forrester's Infrastructure & Operations team, where she was instrumental in the development of Forrester's research and offerings in continuity, availability, and information storage and protection.Prior to joining Forrester, Stephanie was a senior analyst with Yankee Group, where she provided insight on technology trends to key system, storage, and information protection vendors and consultative advice on strategic and tactical initiatives. Before Yankee Group, Stephanie worked at EMC, first as a technical architect and then as a senior education and productivity consultant. As a technical architect, she articulated EMC's value to partners and customers and designed solutions to meet customer and new market opportunities. As an education and productivity consultant, she managed and supported complex technical training programs for business and practice managers in EMC's Technology Solutions Group. Prior to EMC, Stephanie worked at Accenture as a consultant, focusing on the implementation of business applications (SAP, PeopleSoft) for global businesses.EducationStephanie holds a bachelor's degree in business administration and finance and investments from Babson College.
Jeremiah Cruit is the chief information security officer at ThreatX.
Gary Schauer is an associate with Point B, an integrated management consulting, venture investment, and real estate development 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.