Rev. Proc. 2021-20: Safe harbor, debts deductions having taxpayers you to definitely received very first-bullet PPP money

This new Irs now released an advance brand of Rev. Proc. 2021-20 that provides a secure harbor needless to say taxpayers one received first-bullet Salary Defense System (PPP) funds however, failed to deduct any of the modern qualified expenditures while they relied on previous Irs recommendations one to disallowed for example deductions and therefore was provided just before legislative changes passed from inside the .

Brand new safer harbor doesn’t need this new processing out of a revised return, but could be invoked through an election and you can tying a statement into government income tax return on the income tax year following the taxpayer’s 2020 taxation season.


The brand new PPP-a course providing funding financing having small and large businesses which is administered by the Small business Administration (SBA)-is to begin with revealed from the conditions as part of the Coronavirus Support, Rescue, and you may Monetary Safety Act (CARES Operate) (Club. L. No. 116-136). The latest CARES Work sent to the brand new forgiveness away from shielded funds and you to people count one otherwise is includible during the an eligible recipient’s revenues from the reasoning of such forgiveness is excluded of revenues to possess federal tax objectives.

The Internal revenue service within the 2020 issued recommendations (very first See 2020-thirty two then Rev. Rul. 2020-27) saying that readers away from PPP funds were not to help you subtract or even deductible expenses on the the total amount your percentage of your expenses resulted (or was expected to result) from the forgiveness off a good PPP-protected financing. To phrase it differently, such taxpayers weren’t allowed to subtract expenditures you to if you don’t manage end up being allowable should your payment of your debts is expected to bring about forgiveness of a great PPP mortgage pursuant to help you arrangements from the fresh new CARES Act.

A provision of your Consolidated Appropriations Act, 2021 (Club. L. Zero. 116-260) (enacted ) clarified the treating of new deduction from expenditures and you may so long as zero number might be within the revenues of your own qualified PPP mortgage person from the need away from forgiveness out of indebtedness and you may one no deduction will be rejected, zero income tax characteristic would-be shorter, no foundation increase could be refused of the reason of the difference of one’s PPP loan proceeds from revenues. New legislative transform works well to own income tax ages ending once (new day out-of enactment of your own CARES Act).

This new PPP are arranged to help you end are extended when President Biden on , closed statutes (Bar. L. No. 117-6) one extends this new PPP thanks to is extended thanks to , nevertheless the PPP expansion laws will bring you to to the latest 29 times of the PPP-away from -brand new SBA could only procedure programs registered just before , and cannot undertake any the fresh loan requests).

Rev. Rul. 2021-2 ( legislative transform enabling taxpayers in order to deduct if not deductible costs with the the amount that the payment of these expenditures lead (otherwise try anticipated to impact) on the forgiveness from a loan guaranteed by the PPP. Understand TaxNewsFlash

Rev. Proc. 2021-20

Rev. Proc. 2021-20 brings a safe harbor having taxpayers one acquired PPP funds but, according to research by the prior Irs suggestions (ahead of enactment of statutes) don’t deduct what can was or even deductible expenses paid or obtain from inside the 2020 tax 12 months. Underneath the secure harbor, these types of taxpayers get elect to subtract these types of expenditures towards the a fast submitted original federal tax get back otherwise information go back, given that relevant, towards the taxpayer’s very first taxation season pursuing the taxpayer’s 2020 tax year-and does not require the processing regarding an amended come back otherwise administrative adjustment request the taxpayer’s 2020 income tax 12 months.

The latest safe harbor election is generated of the tying a Alabama usa cash advance statement called “Money Processes 2021-20 Declaration” complete with the mandatory advice to the relevant federal income tax go back.

Rev. Proc. 2021-20 notes your safer harbor does not preclude the brand new Internal revenue service away from examining any activities concerning the advertised write-offs having modern eligible expenses or away from requesting much more information confirming wide variety.