Arkansas HVACR NewsMagazine September 2020

Business

consult with a tax expert to make a decision about how this will apply to your business. Although you won’t need to in clude the forgiveness amount in your gross income for federal income tax purposes, the current guidance is unclear as to whether or not you will need to include the forgiveness amount in your business’ gross income for state and local tax purposes. You should be aware though, that those expenses covered with PPP financing that would normally be tax deductible, like wages and the forgiven debt, will not be tax deductible. The Hill recently reported : “The IRS said in its guidance Thursday that expenses that result in forgiveness of a PPP loan are not tax deductible in order to prevent a “double tax benefit,” and continued, “The agency cited Section 256 of the tax code, which states that deductions can’t be taken if they are tied to a certain class of tax-exempt income. If desired, Congress could override the IRS’s stance by passing a law that explicitly allows the deductions.” In other words you won’t be able to get forgiveness of your PPP loan and take the tax deductions associated with the covered expenses. This is another areas where we encourage you to seek the advice of your accountant, CPA, or tax attorney.

Are Forgiven PPP Loans Taxable? Article provided by Nav,

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by Ty Kiisel

Are forgiven PPP loans taxable? The short answer may be, “No,” but the complete answer could be, “Maybe.” It depends on whether we’re talking about federal taxes or state taxes. I’m not an accountant and you should not take my comments here to be either tax advice or legal advice, but merely an effort to help inform the questions I advise you to speak with your accountant, CPA, or tax attorney about. According to the text of the CARES Act 1106(i): “Taxability.— For purposes of the Internal Revenue Code of 1986, any amount which (but for this subsection) would be includible in gross income of the eligible recipient by reason of forgiveness described in subsection (b) shall be excluded from gross income. ” In other words, it appears that forgiven PPP loans, at least as far as the IRS and your federal taxes are concerned, will not be taxed because they won’t be considered gross income. That b eing said, I’m not a tax expert and this is merely my understanding from reading the CARES Act and looking a little deeper. I suggest you