{"id":75,"date":"2020-06-11T15:13:00","date_gmt":"2020-06-11T15:13:00","guid":{"rendered":"https:\/\/www.managementconceptscpa.com\/blog\/?p=75"},"modified":"2020-06-11T15:13:00","modified_gmt":"2020-06-11T15:13:00","slug":"fortunate-enough-to-get-a-ppp-loan-forgiven-expenses-arent-deductible","status":"publish","type":"post","link":"https:\/\/www.managementconceptscpa.com\/blog\/2020\/06\/11\/fortunate-enough-to-get-a-ppp-loan-forgiven-expenses-arent-deductible\/","title":{"rendered":"Fortunate enough to get a PPP loan? Forgiven expenses aren\u2019t deductible"},"content":{"rendered":"<p><img decoding=\"async\" src=\"http:\/\/s3.amazonaws.com\/snd-store\/a\/47107744\/05_18_20_1218907320_sbtb_560x292.jpg\" \/><\/p>\n<p>The IRS has issued guidance clarifying that certain deductions aren\u2019t allowed if a business has received a Paycheck Protection Program (PPP) loan. Specifically, an expense isn\u2019t deductible if both:<\/p>\n<ul>\n<li>The payment of the expense results in forgiveness of a loan made under the PPP, and<\/li>\n<li>The income associated with the forgiveness is excluded from gross income under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.<\/li>\n<\/ul>\n<p><strong>PPP basics<\/strong><\/p>\n<p>The CARES Act allows a recipient of a PPP loan to use the proceeds to pay payroll costs, certain employee healthcare benefits, mortgage interest, rent, utilities and interest on other existing debt obligations.<\/p>\n<p>A recipient of a covered loan can receive forgiveness of the loan in an amount equal to the sum of payments made for the following expenses during the 8-week \u201ccovered period\u201d beginning on the loan\u2019s origination date: 1) payroll costs, 2) interest on any covered mortgage obligation, 3) payment on any covered rent, and 4) covered utility payments.<\/p>\n<p>The law provides that any forgiven loan amount \u201cshall be excluded from gross income.\u201d<\/p>\n<p><strong>Deductible expenses<\/strong><\/p>\n<p>So the question arises: If you pay for the above expenses with PPP funds, can you then deduct the expenses on your tax return?<\/p>\n<p>The tax code generally provides for a deduction for all ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business. Covered rent obligations, covered utility payments, and payroll costs consisting of wages and benefits paid to employees comprise typical trade or business expenses for which a deduction generally is appropriate. The tax code also provides a deduction for certain interest paid or accrued during the taxable year on indebtedness, including interest paid or incurred on a mortgage obligation of a trade or business.<\/p>\n<p><strong>No double tax benefit<\/strong><\/p>\n<p>In IRS Notice 2020-32, the<strong>\u00a0<\/strong>IRS clarifies that no deduction is allowed for an expense that is otherwise deductible if payment of the expense results in forgiveness of a covered loan pursuant to the CARES Act and the income associated with the forgiveness is excluded from gross income under the law. The Notice states that \u201cthis treatment prevents a double tax benefit.\u201d<\/p>\n<p><strong>More possibly to come<\/strong><\/p>\n<p>Two members of Congress say they\u2019re opposed to the IRS stand on this issue. Senate Finance Committee Chair Chuck Grassley (R-IA) and his counterpart in the House, Ways and Means Committee Chair Richard E. Neal (D-MA), oppose the tax treatment. Neal said it doesn\u2019t follow congressional intent and that he\u2019ll seek legislation to make certain expenses deductible. Stay tuned.<\/p>\n<p><em>\u00a9 2020<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The IRS has issued guidance clarifying that certain deductions aren\u2019t allowed if a business has received a Paycheck Protection Program (PPP) loan. Specifically, an expense isn\u2019t deductible if both: The payment of the expense results in forgiveness of a loan made under the PPP, and The income associated with the forgiveness is excluded from gross [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","footnotes":""},"categories":[4],"tags":[],"_links":{"self":[{"href":"https:\/\/www.managementconceptscpa.com\/blog\/wp-json\/wp\/v2\/posts\/75"}],"collection":[{"href":"https:\/\/www.managementconceptscpa.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.managementconceptscpa.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.managementconceptscpa.com\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.managementconceptscpa.com\/blog\/wp-json\/wp\/v2\/comments?post=75"}],"version-history":[{"count":1,"href":"https:\/\/www.managementconceptscpa.com\/blog\/wp-json\/wp\/v2\/posts\/75\/revisions"}],"predecessor-version":[{"id":76,"href":"https:\/\/www.managementconceptscpa.com\/blog\/wp-json\/wp\/v2\/posts\/75\/revisions\/76"}],"wp:attachment":[{"href":"https:\/\/www.managementconceptscpa.com\/blog\/wp-json\/wp\/v2\/media?parent=75"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.managementconceptscpa.com\/blog\/wp-json\/wp\/v2\/categories?post=75"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.managementconceptscpa.com\/blog\/wp-json\/wp\/v2\/tags?post=75"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}