The Paycheck Protection Program (PPP) has been touted as relief for small businesses, giving small businesses cash to survive during this unprecedented time. The program features a component of forgiveness for payroll costs paid within eight weeks of funding. The program is clear that this forgiveness will not be taxable to the borrower. While the forgiveness is not taxable, an item not addressed in the CARES Act was the deductions funded by the forgiveness portion of the loan. The IRS on Friday addressed this in a Notice 2020-32 stating that any expense funded by the forgiveness portion of the PPP loan would not be deductible. While this is truly not the intent of Congress, it is the correct interpretation of the law as written. The AICPA along with many business leaders are urging Congress to address this immediately to bring the intent behind the CARES Act into the current law.

Please let us know of any questions you may have, and thank you for the continued opportunity to be of service.

Respectfully,

Stewart L. Mueller, CPA – Principal/Owner, [email protected], Extension 0
Mike Sommers, CPA – Tax Principal, [email protected], Extension 2
Bill Steinhart, CPA – Tax Director, [email protected], Extension 3
Jack Barrett, CPA – Tax Manager, [email protected], Extension 5
Ashley Choate, CPA – Financial Manager, [email protected], Extension 4

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Any tax advice included in this written or electronic communication was not intended or written to be used, and it cannot be used by the taxpayer, for the purpose of avoiding any penalties that may be imposed on the taxpayer by any governmental taxing authority or agency.