• Accounting
        • Your financial statements should show a complete picture of your business, and lay the foundation to help you create a strategy for the future.
          READ MORE>

        • Tax
        • Tax returns prepared to ensure we minimize your liability and keep more of your earnings over the long term.
          READ MORE>

        • Business Advisory
        • From proper entity selection at the inception of a business to developing an exit strategy, we are here to guide you in making informed decisions that are goal driven and take into consideration the materiality of your financial situation.
          READ MORE>

        • QuickBooks
        • We maximize your QuickBooks investment by customizing the software to meet your specific needs and industry best practices.
          READ MORE>

        • Litigation Support
        • We employ strong analytical and communication skills to produce evidence that supports your position in cases of a dispute or negotiation.
          READ MORE>

        • M&A Advisory
        • Whether you are selling, acquiring or expanding, we are well equipped to ensure you respond to opportunities swiftly and with confidence.
          READ MORE>

        • SJG
        • Manufacturing & Distribution
        • Success in manufacturing and distribution hinges on your ability to manage numerous details with accuracy and foresight into how they impact current and future operations.
          READ MORE>

        • Consulting Services
        • You focus on your core competencies, customer service and strategy and we’ll keep you from getting caught off-guard by daily financial tasks or overwhelmed by growth.
          READ MORE>

        • Medical
        • Patient care is your primary concern. Providing the best clinical experience for your patients continues to get more difficult and costly. Delivery models are changing from fee for service to quality based.
          READ MORE>

        • Legal
        • Running a legal firm is a balancing act with high stakes. Your reputation hinges on your ability to support clients with responsiveness and accuracy.
          READ MORE>

        • Real Estate
        • Real estate is characterized by large material gains and losses. Every transaction has the potential to impact your accounting and tax situation.
          READ MORE>

        • Technology
        • Perhaps more than any other industry, technology companies must have an infrastructure built to scale. A culture of continuous iteration requires an ability to account for a fluctuating profit margin.
          READ MORE>

        • Professional Services
        • With a consultative, integrated approach to accounting, tax and consulting services for businesses and individuals, we work hand in hand with you to achieve your goals.
          READ MORE>

        • SJG
  • CAREERS
  • CONTACT

SJG News

IRS Clarifies Stance On No Deductibility Of Expenses Paid With PPP Funds-Now What?

The IRS just released Revenue Ruling 2020-27 and Revenue Procedure 2020-51 to clarify the rules for deducting expenses paid with PPP funds. (November 18, 2020)

To clarify, Rev. Rul., 2020-27, is the IRS’s official position on the issue of deductibility. Revenue Procedure 2020-51 states instructions on how to implement the IRS’ position.

These both confirm and further provide additional guidance regarding the IRS’ notice 2020-32 issued in May, which informed us that:

PPP loans are to be excluded from income and no deduction is allowed for an eligible expense that is otherwise deductible if the payment of the eligible expense results in forgiveness of the covered loan. In other words, you get the benefit of the money, but you can’t deduct payments for expenses used in your forgiveness calculation. This effectively increases your net business income and resulting tax liability and has the same bottom line effect as if it was considered income on forgiveness of debt.

***The Rev. Rul.2020-27 further makes clear that even if forgiveness hasn’t happened, borrowers can’t deduct expenses paid for with PPP funds (in 2020) if they reasonably believe the loan will be forgiven (in 2021).

The Ruling gives two examples. In one,  the taxpayer (designated as B) hasn’t applied for forgiveness by the end of 2020 (which will be the case for many of you out there) but has satisfied all of the requirements under the Coronavirus Aid, Relief and Economic Security Act (CARES Act) and expects to apply for forgiveness in 2021. The rule states “at the end of 2020 B both knew the amount of eligible expenses that qualified for reimbursement in the form of covered loan forgiveness and has a reasonable expectation of reimbursement.” Because that reimbursement of the loan was “foreseeable,” B may not deduct her eligible expenses.

The uncertainty surrounding the treatment of PPP loan expenses has been a source of controversy and much speculation and has resulted in various proposed new rules by legislators. It has been frustrating for almost everyone involved (borrowers, lenders, tax professionals, etc).

What we do know is that this is a game changer which will result in material tax liabilities that may not have been anticipated by borrowers.

S.J Gorowitz Accounting and Tax Services, P.C. is ready to help you understand what this may mean to your business and to help navigate complex tax issues of 2020.

 

Share This:

Share on facebook
Facebook
Share on google
Google+
Share on twitter
Twitter
Share on linkedin
LinkedIn

Subscribe to Our Newsletter

Recent Posts

News Archive