Rev. Proc. 2021-20: Safer harbor, expense deductions having taxpayers one to obtained first-round PPP funds

Rev. Proc. 2021-20: Safer harbor, expense deductions having taxpayers one to obtained first-round PPP funds

New Irs now released a progress kind of Rev. Proc. 2021-20 that provides a safe harbor for sure taxpayers you to definitely obtained first-bullet Income Defense Program (PPP) money however, don’t deduct the fresh eligible costs as they relied on earlier Irs recommendations that disallowed such as write-offs and that are awarded ahead of legislative change passed into the .

The fresh new safer harbor doesn’t need this new processing away from a revised go back, but can end up being invoked through a keen election and you can tying good declaration to your federal income tax return for the taxation 12 months following the taxpayer’s 2020 tax year.


Brand new PPP-a course getting resource financing to own small and large enterprises that is applied from the Small company Management (SBA)-are to start with launched from the specifications within the Coronavirus Support, Recovery, and you can Financial Security Act (CARES Operate) (Club. L. Zero. 116-136). The latest CARES Operate provided for the forgiveness regarding secured funds and one people matter that otherwise would-be includible in the an eligible recipient’s gross income from the cause of such forgiveness are excluded off gross income for government taxation aim.

The newest Irs during the 2020 approved recommendations (earliest Notice 2020-thirty-two after which Rev. Rul. 2020-27) saying one users out-of PPP finance just weren’t in order to subtract if you don’t deductible expenses for the the total amount that the percentage of one’s expenditures resulted (otherwise is expected to effects) throughout the forgiveness away from a PPP-guaranteed financing. Simply put, this type of taxpayers weren’t permitted to deduct expenses you to or even carry out getting deductible in the event your fee of your bills is actually anticipated to produce forgiveness from good PPP mortgage pursuant in order to terms of the fresh new CARES Work.

A supply of your Consolidated Appropriations Act, 2021 (Pub. L. No. 116-260) (introduced ) explained the treating the newest deduction away from costs and you can so long as zero number could be as part of the revenues of your own qualified PPP loan recipient by the reason out of forgiveness off indebtedness and you can that no deduction could be rejected, zero taxation feature might be shorter, with no base boost would be refuted from the reasoning of your own different of the PPP loan arises from gross income. Brand new legislative transform is useful having income tax many years ending after (the big date out-of enactment of one’s CARES Operate).

The fresh PPP try scheduled to end is stretched when President Biden to your , closed guidelines (Pub. L. Zero. 117-6) you to definitely stretches new PPP using try longer through , nevertheless the PPP expansion guidelines provides one for the final 30 times of the PPP-away from -new SBA are only able to procedure apps registered prior to , and should not deal with any the applications).

Rev. Rul. dos0dos1-dos ( legislative change making it possible for taxpayers so you can deduct if not deductible expenses with the the amount your percentage of such expenses resulted (or is actually likely to effects) regarding the forgiveness from a loan guaranteed because of the PPP. Realize TaxNewsFlash

Rev. Proc. 2021-20

Rev. Proc. 2021-20 brings a secure harbor getting taxpayers one to obtained PPP loans but, in line with the past Irs suggestions (just before enactment of the legislation) did not deduct what might had been if not allowable expenses paid back or obtain from inside the 2020 tax 12 months. Under the safe harbor, this type of taxpayers can get elect to subtract this type of expenditures title loans Minnesota towards a fast recorded brand spanking new federal income tax return otherwise advice come back, as appropriate, to the taxpayer’s first income tax 12 months adopting the taxpayer’s 2020 tax year-and does not have to have the filing out of an amended come back otherwise administrative adjustment obtain the taxpayer’s 2020 taxation season.

The new secure harbor election is made of the tying an announcement called “Money Techniques 2021-20 Declaration” that includes the necessary recommendations on the relevant federal tax return.

Rev. Proc. 2021-20 cards that the secure harbor will not preclude new Internal revenue service out of examining people affairs relating to the stated write-offs to own brand new qualified expenditures otherwise from asking for details guaranteeing number.

Comments are closed.