IRS Clarifies Question of Deductibility of Expenses that Lead to PPP Loan Forgiveness
The Paycheck Protection Program (PPP) created under the CARES Act provides loans to small businesses. These loans are eligible for full or partial forgiveness if used for payroll and other specific business expenses as defined by the CARES Act. The CARES Act clearly indicates that any debt forgiveness under this program will not be included in taxable income.
A question still remained as to whether or not a deduction would be allowed for otherwise deductible expenses funded by the forgivable portion of these loans. On April 30, 2020, the IRS issued Notice 2020-32, which clearly states that no deduction is allowed for an expense that is otherwise deductible, if the payment of the expense results in forgiveness under the Paycheck Protection Program.
For further clarification of this issue or any matters related to the Paycheck Protection Program, please do not hesitate to connect with us.