IRS Releases Guidance on PPP Loan Forgiveness
The IRS has given direction on how loan forgiveness will function for the $659 billion in Paycheck Protection Program (PPP) advances from the two designations made by Congress to the Small Business Administration (SBA).
While inclusion on the best way to apply for PPP advances was broad, little was accounted for on how the pardoning would happen until IRS Notice 2020-32 carried clearness to the program. Most notably, the IRS has confirmed that employers cannot claim tax deductions for expenses that would typically be fully deductible such as wages and rent.
PPP loans are available for employers with fewer than 500 employees of up to $10 million at 1% interest to cover expenses like payroll and overhead for eight weeks after loan issuance. Employers must not cut workers or wages and it must be supported with certifiable documentation for the forgiveness of most or all of the loan. Acceptable expenses for forgiveness include payroll (capped at $100,000 per employee), mortgage interest, rent, and utilities.
Forgiveness of the loan is reduced if the number of full-time workers decreases and/or compensations or wages lessen by over 25% for employees making under $100,000 in 2019.
Employers cannot double-dip with the CARES Act employee retention tax credit program.
Contact us for assistance with understanding your tax credit and PPP loan options.