Costs paid back that have 2020 PPP fund would be subtracted on 2021 tax statements

Costs paid back that have 2020 PPP fund would be subtracted on 2021 tax statements

New Irs established a safe harbor certainly firms that obtained first-round Paycheck Coverage Program (PPP) fund however, failed to subtract any of the original qualified expenses because they made use of information given before the enactment of the Consolidated Appropriations Operate, 2021 (CAA), P.L. 116-260, in .

From inside the See 2020-32 and you may Rev. Rul. 2020-twenty-seven (that have been obsoleted by the Rev. Rul. 2021-2) brand new Internal revenue service so long as an effective taxpayer one to acquired that loan thanks to the brand new PPP was not allowed to deduct expenditures which might be generally allowable beneath the Code towards the amount the commission ones expenditures contributed to PPP financing forgiveness. From inside the dependence on you to suggestions, of many taxpayers don’t deduct costs paid having PPP financing proceeds on the 2020 tax statements. Congress after clarified regarding the CAA one to deductions are permitted to own or even allowable expenses repaid toward proceeds from a great PPP financing which is forgiven which brand new income tax base or any other properties of your own borrower’s property will never be less consequently of your own loan forgiveness.

The brand new safe harbor during the Rev. Proc. 2021-20 allows taxpayers whom online installment UT filed an income tax seasons 2020 return for the or before taxation come back rather than file amended production otherwise management modifications needs.

Underneath the safer harbor, subject to limitations helping this new Irs to examine people expenditures on audit or request more details otherwise documentation, a great taxpayer can get elect to subtract otherwise allowable unique qualified expenditures towards taxpayer’s quick submitted, in addition to extensions, brand spanking new government income tax come back or information come back towards the taxpayer’s instantly next tax season, unlike on a revised return or administrative changes ask for new taxpayer’s 2020 taxation seasons the spot where the expenses have been repaid otherwise obtain, in case the taxpayer:

  • Is actually good “secure taxpayer,” since the discussed lower than; and you may
  • Joins every conditions to the some time technique of putting some election to make use of the fresh safe harbor.
  • This new taxpayer received exclusive PPP protected loan;
  • The newest taxpayer paid back otherwise incurred brand new eligible expenditures for the taxpayer’s 2020 tax seasons;
  • Towards or in advance of , the fresh taxpayer fast filed, along with extensions, a federal taxation go back or guidance come back on taxpayer’s 2020 taxation seasons; and
  • For the taxpayer’s federal taxation return otherwise recommendations get back, the fresh new taxpayer failed to deduct the initial eligible expenditures due to the fact: (1) The expense triggered forgiveness of one’s unique PPP covered loan; or (2) the taxpayer relatively questioned at the end of the brand new 2020 taxation year your costs carry out end in you to definitely forgiveness.


Rev. Proc. 2021-20 does not affect costs on offered variety of costs from inside the Point 304(b)(2) of Division N, Label III, of CAA, for which just one or organization one to acquired a distinctive PPP secure loan you’ll discovered forgiveness. Since those people brand new expenses just weren’t integrated within the amazing qualified expenses, those costs aren’t entitled to end up being deducted as a consequence of a keen election from the a secured taxpayer to put on this new secure harbor from the money procedure.

Concurrently, the fresh secure harbor cannot connect with PPP second-draw loans introduced beneath the CAA. Once the PPP 2nd-draw funds commonly totally new PPP covered financing, qualified expenditures that result in forgiveness of them financing is actually not included in Rev. Proc. 2021-20.

Some time and trends and come up with election

While making a legitimate election to use this new secure harbor, a shielded taxpayer have to install the statement described less than for the covered taxpayer’s quick filed, and extensions, government income tax go back otherwise guidance come back for the safeguarded taxpayer’s first tax year pursuing the safeguarded taxpayer’s 2020 taxation year within the that your modern eligible costs were paid off or obtain.

  • The brand new safeguarded taxpayer’s label, target, and you can Personal Security number or taxpayer identity amount;
  • A statement that protected taxpayer is actually using the safe harbor inside the Rev. Proc. 2021-20;
  • The quantity and you will date out of disbursement of the taxpayer’s brand spanking new PPP covered mortgage; and you may
  • A list, also definitions and amounts, of the amazing qualified costs repaid or incurred because of the protected taxpayer from inside the shielded taxpayer’s 2020 tax season that will be stated towards government taxation come back otherwise recommendations return to your first tax seasons adopting the 2020 income tax 12 months.

The brand new cash process works well for the income tax seasons stop during the twelve months 2020 and also for the instantly next tax 12 months.