• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer

CMR Associates - Tax | Accounting

  • Home
  • Services
    • Tax Accounting
    • Business Accounting
    • Remote CPA Staffing
  • Industries
    • Real Estate
    • Doctors
    • Restaurants and Hospitality
  • About Us
  • Contact Us
  • Book Appointment
  • Publications
You are here: Home / Small Business Tax Advice / Fortunate enough to get a PPP loan? Forgiven expenses aren’t deductible

Tax Accounting and Business Consulting

Fortunate enough to get a PPP loan? Forgiven expenses aren’t deductible

Louisiana CPA- PPP loan. Forgiven expenses aren’t deductible

Fortunate enough to get a PPP loan? Forgiven expenses aren’t deductible

The IRS has issued guidance clarifying that certain deductions aren’t allowed if a business has received a Paycheck Protection Program (PPP) loan. Specifically, an expense isn’t 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 income under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

PPP basics

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.

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 “covered period” beginning on the loan’s origination date: 1) payroll costs, 2) interest on any covered mortgage obligation, 3) payment on any covered rent, and 4) covered utility payments.

The law provides that any forgiven loan amount “shall be excluded from gross income.”

Deductible expenses

So the question arises: If you pay for the above expenses with PPP funds, can you then deduct the expenses on your tax return?

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.

No double tax benefit

In IRS Notice 2020-32, theIRS 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 “this treatment prevents a double tax benefit.”

More possibly to come

Two members of Congress say they’re 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’t follow congressional intent and that he’ll seek legislation to make certain expenses deductible. Stay tuned.

Filed Under: Small Business Tax Advice

Primary Sidebar

About Us

Covington CPA and Tax Accountants Team

Tax Accounting and Business Consulting: We provide tax accounting, payroll, 401(k), business

Outsourced Staffing

CRAF.IO Accounting Outsourcing

CRAF.IO provides direct hire remote accounting staffing services. For more information, visit https://craf.io/

TAX NEWS AND ADVICE

  • Individual Tax Advice
  • Personal Finance
  • Small Business Tax Advice

Footer

Company Profile

CMR Associates provides tax accounting, payroll, 401(k), business valuation, consulting, and financial planning services.

Serving clients throughout the country, we embrace distributed work environments.

Terms and Conditions
Outsourced Accountant CPA
All the Presidents’ Taxes

Accounting News and Updates

  • What Silicon Valley Bank’s Failure Can Teach Us about Personal Financial Planning
  • How to Maximize Your Tax Refund for 2022
  • Want to Save Taxes? Maximize Deductions and Use the S-Corp Structure
  • IRA account value down? It might be a good time for a Roth conversion
  • Understanding and controlling the unemployment tax costs of your business
  • Watch out for tax-related scams
  • Setting up a Health Savings Account for your small business

Write or Call Today

CMR Associates, LLC
207 E Gibson St
Covington, LA 70433

(888) 530-5630
office@cmrtax.com

© 2023 · Sitemap·