Small companies that handle to get their Paycheck Safety Program loans forgiven could discover themselves dropping priceless tax breaks, in response to new steerage from the Inside Income Service.
Firms that qualify for loan forgiveness below laws Congress authorized gained’t be capable to deduct the wages or different companies bills they paid for utilizing the loan, in response to an IRS discover printed Thursday.
“This treatment prevents a double tax benefit,” the company mentioned within the discover. “This conclusion is consistent with prior guidance of the IRS.”
The steerage clarifies some extent of confusion within the $670 billion small enterprise loan program to assist companies struggling because the coronavirus has introduced the economic system to a standstill. The legislation states that the forgiven loan gained’t be taxed, however didn’t specify whether or not firms might nonetheless write off the bills they coated with that cash.
The tax code permits firms to write down off companies bills, comparable to wages, hire and transportation bills, however usually doesn’t permit write-offs for tax-exempt earnings.
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The ruling provides to the record of obstacles dealing with companies as they attempt to qualify for the Paycheck Safety Program loans.
Small companies have reported technical points in attempting to use for the funds, which restarted Monday after the primary spherical of funding ran out after simply 13 days.
This system, run by the Small Enterprise Administration, offers funds to cowl eight weeks of payroll prices and the loans are forgiven if the employers preserve employees on the job or shortly rehire laid-off employees.