Earlier this month, our trusted team of accountants, CPAs and tax professionals advised business owners to exercise just a bit of patience as we all waited for additional guidance on the loan forgiveness portion of the Paycheck Protection Program (PPP).
Now, thanks to a recent statement from the IRS, we have some much-needed clarity.
The IRS has determined businesses that either already have received loan forgiveness or have a reasonable expectation they will have their loans forgiven won’t be able to deduct business expenses paid for by the loan. However, the IRS did say businesses which are unable to have their debts forgiven — whether it’s because their loan forgiveness request is denied or if they simply decide not to seek it — can still claim those tax breaks for things like payroll, mortgage payments and utility costs.
If you’re a business owner, what does this mean?
- No reason to wait anymore. Thanks to this clarity, it’s now possible to craft a tax plan that operates under the rules everyone has to play by. Should you want to seek loan forgiveness, there’s no reason to wait any longer to get the process started based on this new guidance.
- Plan to be pleasantly surprised. Even though members of both parties in Congress have said they’re interested in addressing this down the road, make your plan today based on the information we have — that you won’t be able to take the deductions. Doing so means that should Congress change that, it will positively impact your tax plan by identifying future tax savings.
- Each choice depends on the business. For the vast majority of businesses, it will make more financial sense to seek the forgiveness of your loan, however it will be up to each business to decide what is best for them. Working with a tax professional can help you evaluate all the possible scenarios and craft a forward-thinking plan of action.
Padgett has worked with more than 1,000 businesses to secure more than $58 million in PPP funding, and we’re actively working with our clients to help them manage the loan forgiveness process. It’s our job to help you see the whole picture and build a tax plan that enables your business to be successful.
We have long enjoyed strong relationships with leaders from both political parties at various levels of government, and that allows us to keep a close eye on what’s going on. If anything changes or new legislation is passed, our trusted team of accountants, CPAs and tax professionals will keep you informed.
If we can help your business navigate these challenging times, don’t hesitate to reach out to us.