Question: If my client Eloise receives a Paycheck Protection Program (PPP) loan and the entire loan is forgiven, is she allowed a deduction for the business expenses she paid with the loan proceeds?
Answer: No. IRS Notice 2020-32 describes how business expense deductions are not allowed against loan income that was forgiven under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) §1106(b). Because loan proceeds are considered exempt income, taxpayers cannot take business deductions against this income.
About National Association of Tax ProfessionalsThe National Association of Tax Professionals (NATP) is the largest association dedicated to equipping tax professionals with the resources, connections and education they need to provide the highest level of service to their clients. NATP is comprised of over 23,000 leading tax professionals who believe in a superior standard of ethics and exemplify professional excellence. Members rely on NATP to deliver professional connections, content expertise and advocacy that provides them with the support they need to best serve their clients. The organization welcomes all tax professionals in their quest to continually meet the needs of the public, no matter where they are in their careers.
The NATP headquarters is located in Appleton, WI. To learn more, visit www.natptax.com.
Information included in this article is accurate as of the publish date. This post is not reflective of tax law changes or IRS guidance that may have occurred after the date of publishing.