Tax Concerns for PPP Borrowers

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.

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