Tax Concerns Loom for PPP Borrowers Going into Year-End
With 2020 swiftly coming to a close, PPP borrowers are staring down a challenging obstacle in the form of tax implications.
As a reminder, immediate deliberations regarding additional PPP funding within Congress appear to have stalled, meaning at this time, expenses related to any loan forgiveness remain nondeductible for federal tax purposes.
You may recall that back on April 30th, the IRS issued a Notice regarding the tax deductibility of PPP loan-related expenses that has essentially put businesses in a position where their income appears higher than it really is, thus increasing their tax bill. The Notice clarifies that no deduction will be allowed for an expense that is otherwise deductible if the payment of the expense results in forgiveness of a covered loan for which the income associated with the forgiveness is excluded from gross income under Section 1106(i) of the CARES Act.
The American Institute of Certified Public Accountants (AICPA) has written to Congress petitioning for full deductibility for PPP-related business expenses, but until further legislative guidance is issued, businesses are left to determine an appropriate path forward.
As year-end is quickly approaching, we strongly recommend initiating a conversation about the various tax implications of your PPP loan and its potential forgiveness. Please connect with MFA’s PPP Advisory Team to review your unique circumstances and explore next steps.
For additional updates, insights & guidance on PPP loan forgiveness, please visit MFA’s PPP Resource Center.
Material discussed in this communication is meant to provide general information and should not be acted on without obtaining professional advice tailored to you or your company’s individual and specific needs. Any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used by any person or entity, for the purpose of (i) avoiding penalties that may be imposed on any taxpayer or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. This information is for general guidance only and is not a substitute for professional advice.
The information contained herein should not be construed as personalized investment advice. Investment in securities involves the risk of loss, and past performance is no guarantee of future results. There is no guarantee that the views and opinions expressed in this document will come to pass. Historical performance results for investment indexes and/or categories generally do not reflect the deduction of transaction and/or custodial charges or the deduction of an investment-management fee, the incurrence of which would have the effect of decreasing historical performance results. There can be no assurances that your portfolio will match or outperform any particular benchmark.
Information presented was obtained from sources deemed qualified and reliable; however, MFA makes no representations as to accuracy, completeness, suitability, or validity of any information within this communication and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. Any forward-looking statements are believed to be reasonable; however, MFA gives no assurance that such expectations will prove to be correct.