LEGISLATIVE ALERT
Guidance regarding the deduction offset for PPP loan forgiveness...not good news!
Yesterday, the IRS released its guidance regarding the tax year for recognizing the deduction offset resulting from any PPP loan forgiveness.

In newly released formal guidance, the IRS position is 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. 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 ยง265 taking the deductions would be inappropriate.

Further, the IRS guidance states that 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.)

As a result, it appears affected clients will be forced to recognize the deduction offset this year and will need to build it into their Q4 estimated tax payments.

Future clarification from the legislature to overturn this ruling may result, but at this time this is the only clear guidance on the issue.

Please reach out to your tax engagement team leader to address your tax projection needs.

Excerpts from Spidell Publishing, Inc.
We are Here to Help
We are here to serve you, our valuable clients. Please reach out to your engagement team leader if you would like to discuss the various COVID-19 relief programs and how they may impact you and your business. If there's anything we can do to assist you at this time, please contact us.
Visit Our COVID-19 Resource Page

LevitZacks has a dedicated COVID-19 Resource Page with the latest resources and guidance for our clients.

From SBA resources and updates for employers and employees to federal, state and local tax and regulatory changes, you will find the latest resources available in one place.
This information has been provided for informational purposes only and not actual professional tax and/or accounting advice. Before making any decision or taking any action you should consult with your professional advisor about your specific situation.
Please contact your engagement shareholder if you have any questions.