IRS Offers Safe Harbor for Claiming PPP Loan Deductions

AAFCPAs would like to make clients aware that the IRS has recently released a revenue procedure (Rev. Proc. 2021-20) that provides a safe harbor for certain businesses claiming Paycheck Protection Program (PPP) loan deductions.

The Rev Proc is applicable for taxpayers that received a PPP loan but did not deduct certain otherwise deductible expenses paid or incurred during the taxable year(s), due to “reasonable expectation of forgiveness” of their loan. This may have been the case for taxpayers who followed guidance issued by the Department of the Treasury and IRS prior to the enactment of the Consolidated Appropriations Act, 2021. As you may recall, the IRS had previously taken the position that the expenses for which entities had a “reasonable expectation of forgiveness” would be disallowed a deduction as an ordinary and necessary business expense.

The revenue procedure is effective for any tax year ending in the calendar year 2020 and for the immediately subsequent tax year.

There are certain exclusions and a time and manner in which to make the election. Please contact your AAFCPAs Tax Partner to discuss your specific facts and circumstances.

As always, AAFCPAs’ COVID-19 Task Force will continue to monitor the status of the legislation, as well as communications from the IRS and the Treasury Department. We will keep you informed as changes occur or become clarified.

If you have any questions, please contact Brittany Besler, MBA, CPA, Esq. at 774.512.9001, bbesler@nullaafcpa.com; Richard Weiner, CPA, MST at 774.512.4078, rweiner@nullaafcpa.com; or your AAFCPAs Partner.

About the Authors

Brittany Besler
Brittany possesses a unique combination of tax, legal, and business backgrounds, and is a valuable member of AAFCPAs’ Tax practice. She provides tax planning, research, and compliance solutions for corporations, partnerships, nonprofits, individuals, estates & trusts. Brittany advises businesses and individuals on various federal, state, local and foreign tax-related issues, including counseling clients on the consequences of new and updated tax laws. She assists clients in the creation of appropriate and optimal organizational structures, and advises on tax planning and tax exemption compliance. She advises newly-formed and well-established nonprofit clients on meeting compliance requirements of various government agencies, including the IRS rules on fundraising and political activities.
Richard Weiner CPA
Rich has over 30 years of broad tax experience with a specialty in tax planning and consulting for private and publicly-held businesses. Rich has specific expertise in the Software, Bio-Technology, Medical Device, Life Science, Manufacturing, Retail, Professional Service and Publishing industries, as well as U.S. aspects of international taxation. He works extensively with European companies expanding into the U.S. market. Additional areas of focus include companies and stockholders in transition, including structuring of and planning for Mergers & Acquisitions, planning for changes in ownership and management, and adoption of tax methodologies with a view toward the long term. He is well known in his field and is a frequent speaker on a variety of tax related topics.