IRS offers critical guidance on deducting PPP loan expenses
If your company “reasonably” expects to receive forgiveness for your Paycheck Protection Program (PPP) loan in that taxable year, you cannot deduct your PPP expenses.
So says just-released IRS Revenue Ruling 2020-27.
Companies have long had questions about timing of deductions when it comes to PPP loans. The new guidance should put them to rest.
What types of things would companies want to deduct as PPP loan expenses? Examples include payroll costs, mortgage interest, utilities, rents, etc.
Note: That’s true even if you haven’t submitted the application for forgiveness yet.
New safe harbors introduced for deducting expenses
However, employers received some new safe harbors in the also-released Revenue Procedure 2020-51.
That applies to employers who, in the subsequent tax year, either:
- hear from their lender that all or part of the loan is denied, or
- decide not to seek forgiveness for some or all of the loan.
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