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.
Todd Waletzki joined BenefitMall in March, 2015 as the President of the Payroll Division. Todd brings more than 25 years of finance and payroll related experience to the organization and is responsible for maintaining the excellence of payroll operations for BenefitMall. Todd previously held the role as chief operating officer of CompuPay (now BenefitMall) from 2010 to 2012 , where he was responsible for all payroll operational functions.
Todd received his Bachelor of Science in economics from Bemidji State University, and his Master of Science in Economics from Southern Illinois University. He has previously served as a College Instructor at Webster University and Southern Illinois University. Todd and his family currently resides in Dallas.
Nadya Knysh is a managing director at a1qa, which is a software testing provider helping clients including Fortune 500 companies release high-quality solutions. Nadya has a Master’s Degree in informatics, management and modeling and is a certified scrum master. Nadya strives to transfer the knowledge on the significance of QA processes for improving overall quality of the products and eliminating a financial loss due to failures detected.
Christine Runnegar is senior director, Internet Trust at the Internet Society, a global non-profit organization that promotes the open development, evolution and use of the Internet.
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.