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Fri Nov 20, 2020, 01:53 PM

IRS doubles down on nondeductibility of PPP-funded expenses

https://www.journalofaccountancy.com/news/2020/nov/ppp-loan-forgiveness-irs-safe-harbor.html

IRS doubles down on nondeductibility of PPP-funded expenses
By Sally P. Schreiber, J.D.
November 19, 2020

IN guidance issued late on Wednesday, the IRS reiterated its position that taxpayers cannot claim a deduction for any otherwise deductible expense if the payment of the expense results in forgiveness of a Paycheck Protection Program (PPP) loan because the income associated with the forgiveness is excluded from gross income under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136. The guidance came in the form of a revenue ruling (Rev. Rul. 2020-27), which addresses the issue of borrowers who pay expenses in 2020 but whose PPP loan is not forgiven until 2021, and a revenue procedure (Rev. Proc. 2020-51) that provides a safe harbor for PPP borrowers that have their loan forgiveness denied or who choose not to request loan forgiveness.

Under Section 1106(b) of the CARES Act, an eligible recipient of a covered PPP loan can receive forgiveness of indebtedness on the loan in an amount equal to the sum of payments made for the following expenses during the covered period beginning on the covered loan's origination date:
(1) payroll costs;
(2) any payment of interest on any covered mortgage obligation;
(3) any payment on any covered rent obligation; and
(4) any covered utility payment. Section 1106(i) excludes from gross income any amount forgiven under the PPP.

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I do not envy Tax Accountans/CPA's in 2021
😬

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Reply IRS doubles down on nondeductibility of PPP-funded expenses (Original post)
Budi Nov 2020 OP
Laelth Nov 2020 #1
Budi Nov 2020 #2
dalton99a Nov 2020 #3

Response to Budi (Original post)

Fri Nov 20, 2020, 02:05 PM

1. Good.

Most of the PPP money went to organizations that did not use the money as intended by Congress, and few of them deserve additional tax write-offs.

-Laelth

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Response to Laelth (Reply #1)

Fri Nov 20, 2020, 02:26 PM

2. Agree 100% with your statement.

I know someone with a welding shop who got a LOT of PPP $. That's fine, but they had to spend the remaining $300,000 before the deadline, or they'd have to return it.

So they bought 4 brand new, top-line pick up trucks for their 4 owners, in the shop's name. None of them needed a new truck.
I just think it was sick.

Not to mention all the big corps & pals of Trump who were 1st in line, while small Main St businesses closed their doors when the funds quickly ran out.


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Response to Budi (Reply #2)

Sat Nov 21, 2020, 02:34 AM

3. +1

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