PPP loan forgiveness and taxes

Eileen Sherr, CPA, CGMA, MT, director of the AICPA’s Tax Policy & Advocacy team in Washington, D.C., discusses recent IRS guidance regarding the tax treatment of loans under the U.S. Small Business Administration’s Paycheck Protection Program (PPP). This guidance holds that the amount of a PPP loan that is forgiven under the SBA’s procedures is not included in the loan recipient taxpayer’s gross income, but any expenses used to qualify for the forgiveness cannot be deducted on the taxpayer’s income tax return as an ordinary and necessary business expense. We also look ahead to what the change in presidential administration in 2021 might spell for a broad range of taxpayers.

What you’ll learn from this episode:

• How PPP loan forgiveness is excluded from taxpayers’ gross income for income tax purposes, but the IRS regards related business expenses as nondeductible.
• The progress of efforts by members of Congress to clarify in new legislation that the PPP forgiveness-related expenses are intended to be deductible as ordinary and necessary expenses of loan recipients.
• What form advocacy on this issue by the AICPA and its members is taking.
• How and when tax law changes proposed by the Joe Biden–Kamala Harris presidential campaign might be reflected in a proposed budget by the Biden administration.