The U.S. Treasury Department and Internal Revenue Service (IRS) released guidance yesterday clarifying the tax treatment of expenses where a Paycheck Protection Program (PPP) loan has not been forgiven by the end of the year the loan was received.
The IRS issued Revenue Ruling 2020-27 which provides that taxpayers who paid otherwise deductible expenses with PPP funds may not deduct them on their 2020 tax return to the extent that they reasonably expect that their PPP loan will be forgiven.
Revenue Procedure 2020-51 provides that if a taxpayer did not deduct an otherwise deductible expense on their 2020 tax return because they expected their PPP loan to be forgiven, but the loan is not forgiven, either in whole or in part, they may deduct the expense on an amended (and possibly an extended original) return for 2020 or on their original return for 2021.
to view the revenue ruling.
to view the revenue procedure.