Guidance concerning the Payroll Protection Plan is updated continually as the government responds to the economic impacts of COVID-19. Most recently, the IRS released a notice on
April 30 stating that borrowers may not deduct expenses paid using forgiven PPP loan funds.

The Paycheck Protection Program (PPP) established by the CARES Act provides forgivable loans to help small businesses affected by the COVID-19 outbreak cover payroll and other costs. The Act specifically excludes loans forgiven under the PPP from the borrower’s taxable income. According to Senator Chuck Grassley, chairman of the Senate Finance Committee, the IRS’s notice is contrary to the intent of the CARES Act because it effectively negates the beneficial tax treatment of PPP loan forgiveness written in the Act.

Congress may overrule the notice, but due to its recent publication, no legislation to nullify the notice has been proposed at this time. Many of the PPP rules have been fluid, and the IRS’s guidance is likely not an exception. We will continue to monitor guidance on the PPP and provide information as it becomes available. If you have questions or if we can help, please don’t hesitate to contact us.

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Our firm provides the information in this article for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal or other competent advisors. Before making any decision or taking any action, you should consult a professional advisor who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this blog are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability and fitness for a particular purpose.

 

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