May/June 2021 - 23

In November 2020, the IRS provided a press release that
was somewhat confusing as it related to tax consequences for
businesses who obtained PPP loans, but with Congress passing
the Consolidated Appropriations Act, 2021 businesses have
a clearer picture of the tax ramifications: PPP loans that are
forgiven are not taxable and taxpayers may deduct any expenses
associated with the loan. When filing taxes, businesses should
verify this information with a tax professional to ensure that
this ruling applies to its organization.
KEY POINTS
After reading a plethora of online resources from various
websites, one question remains prominently in the forefront:
Will small business owners face tax ramifications due to
receiving PPP funds? The answer was not as cut and dry as
one would expect - at least in early December.
Initial reports leading up to the new act passed in
December indicated in some cases taxes would have to be
paid on the money received, yet in other cases it depended on
how the PPP funds were spent. The new law that Congress is
expected to pass hopes to eliminate the confusion and helps
to clarify the specifics. Yet, information is in constant flux and
exasperating the challenge is that the PPP guidance has been
modified several times since its inception.
Wolters Kluwer Tax & Accounting, a business that provides
resources and guidance on tax and accounting issues, shared
its Press Brief on the new law.
The complexity of the PPP program is why it is so important
to connect with an accountant, sooner rather than later,
to identify how to prepare 2020 tax returns. Each business
should know the amount of money received from PPP loans,
what the funds were used for - detail exact spending in all
expense categories - and prepare this documentation ahead
of meeting with the accountant.
Additionally, if a business applied for loan forgiveness, this
information is critical to share with any tax professional. If
business owners are unsure if it applied for loan forgiveness,
discuss the topic with the tax professional.
PPP LOAN FORGIVENESS
For additional information on how, or why, to apply for PPP
loan forgiveness, SBA.gov has more information for review.
Just note, there are some deadlines in which businesses can
apply for the loans.
The SBA website outlined specific aspects of PPP in two
separate documents, one was issued in August of 2020, the
other issued in December. SBA also provided small business
guidance and loan information on its website. The application
on PPP Loan Forgiveness is also available on SBA.gov.
For a more in-depth read on this topic, check out the
Bloomberg article IRS Blesses Tax Breaks on Forgiven PPP
Loans After Law Change.
PPP loans are complex and it is important to turn to a
professional to discuss any related positive or negative tax
implications or any possible loans businesses may apply for
assistance during the pandemic.
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Spudman * May/June 2021
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http://www.SBA.gov http://www.SBA.gov
May/June 2021

Table of Contents for the Digital Edition of May/June 2021
