With small businesses throughout America flocking to the Paycheck Protection Program (PPP) the IRS has finally issued some guidance on how expenses related to the forgivable loans program will be conducted.
The IRS this week noted that expenses related to the program will not be tax-deductible.
Typically, wages are deductible since they are considered a direct business expense. The IRS, however, has alerted business owners that wages from the PPP will be taxable.
In its guidance, the IRS said the decision was made to avoid a “double tax benefit” to business owners who are relying on the program to stay afloat and keep employees on their payroll.
In making the announcement, the IRS pointed to Section 256 of the U.S. tax code which states that the loans fall into a specific class code.
For business owners worried about end-of-year taxation, there is still the possibility that Congress will override the IRS and allow for double tax benefits given extenuating circumstances.