Can the Paycheck Protection Program be Used as A Tax Deduction?


        Many Small Businesses are anxiously awaiting an opportunity to have their share of some of the COVID-19 relief provisions that have been made by the Coronavirus Relief and Economic Security (CARES) Act. The most well-known is the Paycheck Protection Program (PPP). We have written about this program in the past. One reason it is so attractive to businesses is that a loan of up to $10 million can be forgiven if the owner follows some simple rules and applies all of the money to the firm and its employees. Now the Internal Revenue Service (IRS) has weighed in on how this changes what a business can deduct.

           During normal times, a business can deduct things like wages and rent. These are the same expenses the loan in the PPP is expected to be used for. With that understanding, the IRS has now stated that anything the PPP is used for cannot be deducted from taxes for the business. The reasoning is that this would create a double tax benefit. However, many have pointed out that the CARES Act did not comment on deductions at all. The IRS says that traditional tax rules should apply. Members of Congress feel that these are not normal times and that all measures should be taken to help businesses recover as fast as possible. There is sure to be much more debate on this particular subject. Check with your Qualified Tax Professional to determine which type of Coronavirus relief would be best for you and your business.

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