PPP Safe Harbor
The IRS has issued a safe harbor allowing a taxpayer to claim a deduction in 2020 for certain otherwise deductible eligible expenses if: (1) the expenses are paid or incurred during the taxpayer’s 2020 tax year; (2) the taxpayer receives a Paycheck Protection Program (PPP) loan, which the taxpayer “expects to be forgiven” in a tax year after 2020; and (3) in a subsequent tax year, the taxpayer’s request for forgiveness of the loan is denied, in whole or in part, or the taxpayer decides never to request forgiveness of the loan. If this is the case, some or all of the eligible expenses may be deducted on: (1) the taxpayer’s timely-filed (including extensions) return for 2020; (2) an amended return or an Administrative Adjustment Request (AAR) for 2020; or (3) the taxpayer’s timely-filed (including extensions) return for the subsequent tax year. (Code §265; PPP Loans).
Authored by:
Dr. John Connors, JD, CPA, LLM
Tax Educator’s Network, LLC
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