IRS Provides Safe Harbor Tax Guidance on PPP Loan Business Expense Deductions

  • by AGD Washington Advocacy Representative
  • May 3, 2021
The Treasury Department and the Internal Revenue Service (IRS) issued Revenue Procedure 2021-20 PDF on April 22 for certain businesses that received first-round Paycheck Protection Program (PPP) loans but did not deduct any of the original eligible expenses because they relied on guidance issued before the enactment of tax relief legislation in December of 2020.

Before Congress forced the IRS to change its stance, businesses couldn't deduct regular business expenses (payroll, mortgage interest, rent, etc.) paid with PPP loans to get a double benefit. The new IRS guidance allows borrowers with forgiven PPP loans to retroactively receive the benefit.

The IRS has said that taxpayers can deduct those expenses on their original federal tax return or information return for the first taxable year following their 2020 taxable year instead of filing an amended return or administrative adjustment request.

More information on COVID-19 related tax relief for business can be found on IRS.gov.

Impact on General Dentistry: AGD appreciates the issuance of this IRS guidance to provide clarity to recipients of PPP loans. AGD supported advocacy efforts to ensure that the IRS was treating pandemic relief program benefits in a manner that aligned with Congressional intent and believes this move by the IRS will help PPP recipients receive the benefits they are entitled.