IRS Guidance on Expenses Paid by a Forgiven PPP Loan

The Paycheck Protection Program (PPP) was created by the Coronavirus, Aid, Relief, and Economic Security (CARES) Act to provide relief for small businesses impacted by the COVID-19 pandemic. There were questions, however, whether expenses paid by a forgiven PPP loan would be deductible.

The IRS and the U.S. Treasury Department recently released Revenue Ruling 2020-27 and Revenue Procedure 2020-51 to provide guidance with respect to whether or not expenses paid with PPP loan proceeds are deductible. Their position is that these expenses are not deductible if the taxpayer reasonably expects that the PPP loan will be forgiven.

It may be in your best interest to file for forgiveness as soon as possible. It is also imperative that you speak with your tax professional regarding the details of your specific loan and situation.

We’ll continue to provide updates as they become available. In the meantime, please contact Cg with any questions.