IRS Guidance on PPP loan forgiveness timing issued yesterday

[BulldogTom]

 

2020-68: IRS releases PPP deduction guidance

November 18, 2020

In newly released formal guidance, the IRS has confirmed that taxpayers with a reasonable expectation of PPP loan forgiveness may not deduct expenses paid with those funds, even if the forgiveness has not been granted prior to the end of the taxable year. (Rev. Rul. 2020-27) In the guidance released today, the IRS states that because taxpayers calculate their forgiveness based on eligible expenses paid with PPP funds, the forgiveness of the loan amounts used for those expenses is reasonably expected to occur, and under IRC §265 taking the deductions would be inappropriate.

The IRS supplemented this guidance with additional guidance that states taxpayers who do not apply for forgiveness, or whose forgiveness requests are reduced or denied, may take deductions for expenses paid with the amounts that are not forgiven. (Rev. Proc. 2020-51)

 

Tom
Modesto, CA

 

[Lee B]

Well at least this clarifies the IRS position on this issue. I will be advising my clients to go on extension while we wait to see if Congress cleans this up.

[Medlin Software, Dennis]

Yep, the IRS had to say the existing law is the law :).

[Corduroy Frog]

This has been the general rule for a long time, but just Wednesday, on IRS notice 2020-240, confirmed that expenses covered with PPP loan forgiveness are not deductible, since the proceeds were not taxable.

There are plenty of people waiting on Congress to act and allow deductions for said expenses.  And many people think it will happen but at this point it has not. 

By nature of the subject, this should be captioned under the Coronavirus heading, but I thought the subject matter should be brought to the attention of as many as possible.  Move if you wish.

Edited November 20, 2020 by jklcpa
post merged into existing topic

[Lee B]

The Senate Finance Cmte is making a bipartisan push to have the both the loan forgiveness and the PPP allowable expenditures be non taxable.

They are trying to have this included in the Omnibus Spending Bill which needs to be passed no later than December 11th,

in order to avoid another government shutdown. I really hope this happens. It would be a big relief to have this resolved before the end of the year!

[BulldogTom]

53 minutes ago, cbslee said:

The Senate Finance Cmte is making a bipartisan push to have the both the loan forgiveness and the PPP allowable expenditures be non taxable.

They are trying to have this included in the Omnibus Spending Bill which needs to be passed no later than December 11th,

in order to avoid another government shutdown. I really hope this happens. It would be a big relief to have this resolved before the end of the year!

Praying for this to happen.   

Tom
Modesto, CA