New Forgiveness Rules for Past, Current, and New PPP Money

Be Aware of Emerging COVID-19 Scams
January 8, 2021

Good news! The new Paycheck Protection Program (PPP) law enacted with the stimulus package adds dollars to your pocket if you have or had PPP money.

 

Note that the PPP money comes to you in what appears to be a loan. We say “appears” because you typically pay back a loan. Done right, however, the PPP loan is 100 percent forgiven. The word “loan” makes some businesses leery of this arrangement. Don’t be. The PPP monetary arrangement is a true “have your cake and eat it too” deal.

 

And this remarkable deal applies to your past PPP loan, the PPP loan you have outstanding, and the PPP loan you are about to get if you have not had one before. Here are the details:

 

Loan Proceeds Are Not Taxable

 

The COVID-19-related Tax Relief Act of 2020 reiterates that your PPP loan forgiveness amount is not taxable income to you.

 

Expenses Paid with Forgiven Loan Money Are Tax-Deductible

 

As you may remember, the IRS took the position that expenses paid with PPP loan forgiveness monies were not deductible. Lawmakers disagreed but were unable to get the IRS to change its position. The IRS essentially told lawmakers, “If you want the expenses paid with a PPP loan to be deductible, change the law.”

 

And that’s precisely what lawmakers did. The COVID-19-related Tax Relief Act of 2020 states that “no deduction shall be denied, no tax attribute shall be reduced, and no basis increase shall be denied, by reason of the exclusion from gross income.”

 

In plain English, the expenses paid with monies from a forgiven PPP loan are now tax-deductible, and this change goes back to March 27, 2020, the date the Coronavirus Aid, Relief, and Economic Security (CARES) Act was enacted.

 

Questions?
If you have questions regarding the new forgiveness rules for PPP loans, contact Barefoot Accounting at 904-379-2245.

Jo Hagan, CPA
Jo Hagan, CPA
Jo Hagan is the visionary and founder behind Barefoot Accounting, Inc. She's been in private practice helping businesses like yours grow, understand their numbers, handle tax issues, and more for over 15 years. As a mom, wife, and business owner, Jo understands the struggles business owners and entrepreneurs face, and she has a passion for helping people understand what they need to know in order to be successful in business!

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