COVID -19 UPDATES

We hope that you are keeping yourself, your loved ones, and your community safe from COVID-19 (commonly referred to as the Coronavirus). Along with those paramount health concerns, you may be wondering about some of the recent tax changes meant to help everyone coping with the Coronavirus fallout and we are here to help and keep you informed:

Below are links to COVID - 19 tax legislation and updates:

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IRS Stands Firm - PPP Expenditures Not Deductible

11/30/2020

IRS Stands Firm - PPP Expenditures Not Deductible

~ Author - Janice Hogan, Deluzio & Company, Staff Accountant II ~

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In order to prevent double tax benefits, the IRS advises taxpayers cannot deduct expenses that were paid for using Payroll Protection Program (PPP) loan proceeds which were forgiven (Reg. § 1.265-1). If a taxpayer has applied for and expects to receive forgiveness of their PPP loan, the IRS recently clarified that taxpayers may not deduct these expenses on their 2020 income tax return. If a taxpayer follows this requirement, and subsequently fails to obtain full forgiveness of their PPP loan, the IRS has provided guidance on how to deduct those expenses not taken on the 2020 tax filing:

Safe Harbor guidelines (Rev. Proc. 2020-51) permits taxpayers to claim a deduction if:

  • Eligible expenses are paid or incurred during 2020 tax year
  • Taxpayer receives a PPP covered loan that, at the end of the taxpayers 2020 tax year, the taxpayer expects to be forgiven in a subsequent tax year AND
  • In a subsequent tax year, the taxpayers request for forgiveness of the covered loan is denied, in whole or in part, or the taxpayer decides to never request forgiveness of the covered loan

The taxpayer may deduct these previously non-deductible expenses in one of the following ways:

  • On the taxpayer’s timely, including extensions, original income tax return or information return, as applicable, for the 2020 tax year;
  • On an amended return for the 2020 tax year
  • The taxpayer’s timely, including extensions, original income tax return for the subsequent tax year
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