Taxpayers who received loans through the Paycheck Protection Program (PPP) should be aware of the critical tax consequences relating to the forgiveness of these loans.
The PPP was created by Section 1106 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which provides that an eligible recipient of a covered loan could qualify for forgiveness of the indebtedness if certain criteria are met, and the forgiven loan is not included in taxable income. However, the IRS recently released Notice 2020-32 stating that expenses allocable to the forgiven PPP loan proceeds are not deductible. In other words, if a PPP recipient uses those PPP funds toward expenses that would otherwise be deductible, those expenses will no longer be deductible.
APMA recommends that PPP funds recipients carefully document how these funds are used, and that you work with your accountant to ensure you are in compliance.
Additional Information from Marcum LLP
For further information, contact Dave Mustin at Marcum at 440-459-5755 or Dave.Mustin@MarcumTechnology.com.
To learn more about the PPP program, visit www.apma.org/covid19sba.