The blog post provides important information for small business owners about the forgiveness phase of the Paycheck Protection Program (PPP) process, recommending that they consult with an accountant or the Small Business Development Center (SBDC) and refer to the latest IRS guidance on PPP tax deductions. It highlights that if a business has received both a PPP and an Emergency Injury Disaster Loan (EIDL) Advance, the amount of the advance will be deducted from the PPP forgiveness, potentially resulting in a loan of equal amount. The post also clarifies IRS guidelines on PPP loan forgiveness, stating that any forgiven amounts cannot be deducted from the borrower’s federal tax return to avoid a “double tax benefit”, which could increase the tax burden for businesses. The post concludes by noting that updates will be provided if any future legislation addresses these issues.

PPP Forgiveness Phase Recommendations

As small business owners are shifting their focus on the forgiveness phase of the PPP process, it is recommended to contact your accountant, the SBDC or read the latest guidance from the IRS.

Impact of EIDL Advance on PPP Forgiveness

  • If you received both a PPP and an EIDL Advance, the amount of the Advance will be deducted from the PPP forgiveness. This means that you received any advance amount, you will end up with a loan of equal amount

IRS Guidelines on PPP Loan Forgiveness

  • Any amounts of their PPP loan that are forgiven cannot be deducted from the borrower’s federal tax return. This means that payroll and related costs that have historically been deducted from gross revenues cannot do so, for the IRS states that doing so would create a “double tax benefit”.  It is possible that future Congressional legislation may address this issue, but until/unless this occurs, clients should understand that their tax burden could increase as a result

When/if legislation addresses these situations, an update will be provided.  However, until this occurs, you should be made aware of these realities.
Click here to read the official IRS guidance

Question & Answer

What is recommended for small business owners in the forgiveness phase of the PPP process?

It is recommended to consult with an accountant, the Small Business Development Center (SBDC), or refer to the latest IRS guidance.

How does the EIDL Advance impact PPP forgiveness?

If a business received both a PPP and an EIDL Advance, the amount of the advance will be deducted from the PPP forgiveness, potentially resulting in a loan of equal amount.

What are the IRS guidelines on PPP loan forgiveness?

Any forgiven amounts cannot be deducted from the borrower’s federal tax return to avoid a “double tax benefit”, potentially increasing the tax burden for businesses.