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IRS Offers Expense Deduction Relief For PPP Loan Recipients

By Theresa Schliep · April 22, 2021, 5:41 PM EDT

Businesses that didn't deduct expenses covered by forgiven Paycheck Protection Program loans because they were relying on earlier guidance barring those deductions can now claim them on their next tax returns, the Internal Revenue Service said Thursday.

Deductions for business expenses covered by forgiven loans under the Coronavirus Aid, Relief and Economic Security Act  can be claimed on a business' subsequent tax return, the agency said in Revenue Procedure 2021-20. While the IRS initially barred businesses from taking deductions on such expenses if their loans were forgiven, Congress reversed that guidance in a year-end spending bill passed in December.

Thursday's guidance allows businesses that relied on the earlier guidance to claim expense deductions on returns following their 2020 tax returns, according to the IRS. Businesses subsequently don't have to file amended tax returns for 2020 or file administrative adjustment requests, the agency said. 

The agency released guidance in January installing the changes made by the spending bill, which apply to years ending after March 27, 2020, when the CARES Act was enacted

--Additional reporting by Dylan Moroses and Christoper Cole. Editing by Neil Cohen.

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