This week the U.S. Senate and House of Representatives passed the second round of COVID relief, the Consolidated Appropriations Act. The legislation provides another round of economic impact payments to individuals as well as additional funding for small businesses. Certain eligible small businesses who received the first wave of the PPP loan may be eligible to apply again. The legislation also opened the applications to non-profits, independent contractors, sole proprietors and the eligible self-employed. Additionally, the most anticipated guidance on the tax treatment of the Paycheck Protection Program (PPP) loan has been made clear.
Originally, the IRS guidance stated expenses paid with PPP funds would not be deductible. As part of the new legislation, business that are using PPP funds are able to deduct expenses paid with forgiven PPP loans. The revised guidance brings the IRS in alignment with the intent of congress in making the PPP funds non-taxable. While this clarification was greatly anticipated, there are numerous other key provisions. For additional details, see the following articles published by The Journal of Accountancy:
- COVID-19 relief bill addresses key PPP issues
- Many tax provisions appear in year-end coronavirus relief bill
