ALERT: Expenses Paid with PPP Funds Not Deductible

ALERT: Expenses Paid with PPP Funds Not Deductible

05/1/2020 Tags: Announcements, In the News, COVID-19, PPP

The IRS issued Notice 2020-32 on April 30 to clarify details on how expenses incurred as part of a Paycheck Protection Program will be taxed.

Under the CARES Act, the income from the loan forgiveness is excluded from taxable income. However, with the new notice from the IRS on April 30, related expenses from the loan forgiveness are not deductible.

In other words, the debt forgiveness is not taxable, but the covered expenses incurred in the payroll, rent, mortgage interest, and utilities are not deductible. The IRS cites Section 265 for their authority.

We know that rules and guidance are changing moment by moment, and we'll do our best to keep you updated quickly so you can make good, smart decisions for you and your business.

Also, because everyone's tax situation is different, you may want to consult with your tax advisor to fully understand the impact on your tax projections and cash flow.

If there's anything we can do for you, please don't hesitate to let us know.

This communication is intended to provide general information on legislative COVID-19 relief measures as of the date of this communication and may reference information from reputable sources. Although our firm has made every reasonable effort to ensure that the information provided is accurate, we make no warranties, expressed or implied, on the information provided. As legislative efforts are still ongoing, we expect that there may be additional guidance and clarification from regulators that may modify some of the provisions in this communication. Some of those modifications may be significant. As such, be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed.

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