Payroll Protection Program and Tax Deductions
The IRS recently issued Notice 2020-32, which disallows the deduction for wages or certain other expenses paid with proceeds from a loan from the Payroll Protection Program, to the extent that the loan is forgiven. (Such forgiveness is excluded from income.)
Some members of Congress have indicated that they disagree with this interpretation and have introduced new legislation to change this treatment. Until/unless such new legislation is enacted into law, taxpayers should consider the current IRS guidance when planning and projecting the tax effects of expenses paid with proceeds from the Payroll Protection Program.