IRS PPP Guidance: November 18, 2020
The IRS released Revenue Ruling 2020-27 and Revenue Procedure 2020-51 on November 18, 2020, although both will be dated December 7, 2020, related to the non-taxability of PPP loans and corresponding non-deductible expenses used to forgive those loans.
The IRS position is:
- If you apply for forgiveness or plan to apply for forgiveness in 2020 or 2021
- And you can reasonably expect to receive forgiveness,
- Then the deductions are not deductible no matter when you apply.
The result is an increase in your taxable income in 2020 by the amount of the SBA loan that is expected to be forgiven.
To reiterate, if you have checked all the boxes as required by the SBA and you are completing an application for 100% loan forgiveness, then 100% of the deductions used on that application will not be deductible in 2020, regardless of the time you apply and are approved for loan forgiveness.
- The portion that is not expected to be forgiven
- Or the portion that is subsequently denied.
- That deduction can be filed with:
• A timely filed 2020 tax return including extensions
• An amended 2020 tax return
• An Administrative Adjustment Request, 6227 adjustment
• A subsequent year (2021, 2022, etc.) timely filed tax return including extensions
An act of congress is the only remaining way that the PPP deductions may become deductible. If passed, the language of Senate Bill 3612 would allow expenses used for PPP loan forgiveness to be deducted. The current rumor is this Bill will not get passed on a stand-alone basis, and only stands a chance if it is included in a much larger stimulus package.
If you have any additional questions, please do not hesitate to contact us.