More bad news from IRS for firms that took out paycheck protection loans. In May, the agency issued public guidance saying that small businesses that have their Paycheck Protection Program loans forgiven cannot deduct expenses that result in forgiveness of the loan. IRS now says firms can’t deduct such expenses paid or incurred in 2020 if firms reasonably expect at year-end to receive forgiveness of the debt in 2021. This is so even if the taxpayer hasn’t yet submitted an application for forgiveness of the PPP loan before the end of 2020 (Revenue Ruling 2020-27).
Lobbying groups continue to press Congress for a legislative fix.