Previously we shared that the IRS will disallow deductible expenses for businesses with PPP loans and to write your congressional representative to reverse that decision. However, this article conveys some hope: IRS issued Rev Proc 2020-51, a safe harbor giving flexibility to discern the best treatment of whether to take PPP loan forgiveness or deductible business expenses.
To qualify, you must meet certain conditions:
1. You paid/incurred expenses in the 2020 taxable year,
2. You reasonably expect loan forgiveness,
3. You submitted before year end or intend to submit an application for covered loan forgiveness, and,
4. In a subsequent tax year, you are denied forgiveness OR you decide NOT to seek forgiveness for some or all of the covered loan.
Certain procedures must be followed to make this election. So as with other related matters in this interesting tax year, we remain flexible, attentive, and informed to help you make the best decision possible for your business. Please contact us with questions.
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