On Thursday, April 30th, the IRS one-upped Congress regarding the taxability of the Paycheck Protection Program (PPP) Loan forgiveness.
Congress wrote very specific language in the Act, EXCLUDING the loan forgiveness as taxable income. They wanted 100% of the loan be earmarked to pay employees and facility costs.
Well, the IRS backdoored this – they did not challenge that the loan forgiveness is not taxable. Instead, they announced that the payroll and facility costs that the loan funds are NOT tax deductible.
Bottom line, your PPP is now TAXABLE. So, most companies will lose about 30% of their PPP Loan to taxes and startups will not be able to use the PPP funded payroll in the calculation of their R&D Credit – reducing their R&D Credit by about 15%. Ouch!
Both Democrats and Republicans are not happy with the IRS, so stay tuned as the Swamp battles this one out.
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