Spencer Accounting Group, LLC - Tax Planning and Preparation Services - West Allis, Milwaukee, Brookfield, Waukesha, United States and Saudi Arabia
  • Home
  • Pricing
    • Rush & Cancellation Policy
  • Let's Chat
  • Home
  • Pricing
    • Rush & Cancellation Policy
  • Let's Chat

FREE Tax Tips and Updates

Browse our blog for helpful tax planning and preparation information.

PPP Expense Deductions

12/3/2020

0 Comments

 
Picture


From what we know, when lawmakers originally passed the Paycheck Protection Program (PPP), they thought that under its provisions,

  • you did not pay taxes on the forgiveness amount, and
  • you also could deduct the expenses that you paid with the PPP money.

Fly in the Ointment 

In late April, the IRS issued Notice 2020-32, which asserts that PPP loan recipients may not deduct business expenses paid using the PPP monies that gave rise to forgiveness (defined payroll, rent, utilities, and interest).

Lawmakers’ Take 

In a May 5, 2020, letter to Secretary of the Treasury Steven Mnuchin, Senator Chuck Grassley (chairman of the Committee on Finance), Senator Ron Wyden (ranking member on the Committee on Finance), and Congressman Richard E. Neal (chairman of the Committee on Ways and Means) jointly stated that the IRS got this wrong and that the intent of the CARES Act was for the PPP to be a tax-free grant.

The letter makes sense. You can read it here.

The Do-Nothings

The IRS was unmoved by the lawmakers’ letter. The IRS position was clear: no deduction for the expenses paid with the PPP money. The IRS understood that perhaps lawmakers didn’t mean that to happen, but in the eyes of the IRS, the way that the lawmakers enacted the law created the problem. To fix it, lawmakers simply need to pass a new law.

Frankly, we thought that lawmakers would pass a new law and take care of this problem. But no, that has not happened.

New Nails in the Coffin

On November 18, 2020, the IRS drove two new nails into the coffin regarding deductions for PPP monies that were forgiven and spent on payroll, rent, interest, or utilities.

  • Nail 1. In Revenue Ruling 2020-27, the IRS ruled that you may not deduct expenses paid with the PPP loan monies if you have received or expect to receive forgiveness of those loan monies.
  • Nail 2. In Revenue Procedure 2020-51, the IRS set forth safe-harbor procedures to follow if your PPP forgiveness is subsequently denied or if you decide not to apply for forgiveness.

With the rulings described above, the IRS has clarified its position and clearly stated to lawmakers: if you don’t like the non-deductibility of expenses paid with PPP monies, change the law.
Picture

What to Do Now

Join with hundreds of thousands of business taxpayers and tax professionals who are urging lawmakers to fix the non-deductibility issue.

To help encourage the action you desire (whether you’re for or against deductibility), get in touch with your state’s lawmakers.

  • S. 3612 is the Senate bill to make the PPP forgiveness money used to pay business expenses tax-deductible. To express your yea or nay on S. 3612, contact your senators. You can find them at this link: https://www.senate.gov/senators/contact. 
  • H.R. 6821 is the House bill to make the PPP forgiveness money used to pay business expenses tax-deductible. To express your yea or nay on H.R. 6821, contact your representative. You can find him or her at this link: https://www.house.gov/representatives. 

You don’t need to be big and formal about your yea or nay. You can fax, email, or phone and simply say you support or oppose the bill. It’s that easy—and it’s effective. Do it.

If you would like to discuss the effect nondeductibility has on your taxes, contact us.

​
0 Comments



Leave a Reply.

    We're Here to Help

    Get advice from our experienced network of financial managers. 
    ​

    If you Value our Blog, We have an ask.

    We spend hours researching data to help you understand your finances and taxes, including historical context, issues, and solutions. Our goal is to empower people to improve  their relationship with money. ​Please consider a $3 donation today.

    Tax Plan Video

    Important Disclosures


    Spencer Accounting Group, LLC does not provide investment, tax, legal, or retirement advice or recommendations in these blogs. The information presented here is not specific to any individual's personal circumstances.

    ​
    To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
    ​
    These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

    GET STARTED

    Author

    Keana Spencer is an Accountant, Entrepreneur, and Educator to her clients, with a strong passion.  Keana has over 10 years of experience and through her practice, she is a source of knowledge and strategies to her clients.

    Keana founded this website and decided and created this blog page to offer a space for those seeking knowledge to understand, however not to be confused with advice or planning strategies.

    RSS Feed

    Accounting Services
    Tax Preparation
    Picture
    Picture
Home
Net30 Account Info
Privacy Policy
Contact Us

Picture
Picture
Picture
Copyright 2021 ALL RIGHTS RESERVED.
Photo used under Creative Commons from verchmarco