IRS Clarifies How PPP Recipients Approach Expense Deductions

WASHINGTON, DC – This week, the Internal Revenue Service (IRS) issued a ruling that borrowers expecting Paycheck Protection Program (PPP) loan forgiveness applications to be approved must disallow a deduction for qualified 2020 expenses in 2020 tax returns, even in situations where the forgiveness application has not been approved or filed by the end of the year. Earlier this year, the IRS said that qualified expenses that generate PPP loan forgiveness are non-deductible and this recent ruling was issued in response to questions raised about non-deductible expenses in situations where the expenses are paid in 2020 and the forgiveness of the loan may not occur until 2021. The American Bankers Association (ABA) is expressing concern that the reduction in uncertainty afforded by the guidance could accelerate non-deductibility with a negative effect on PPP borrowers’ cash flow. The IRS also issued a revenue procedure that provides guidance for PPP borrowers that do not apply for forgiveness or have all or part of the forgiveness application denied.
(SOURCE: All Ag News)