Multibillion-Dollar Tax Issues Cloud Small Business Loan Program
There is confusion surrounding tax obligations for small business owners who want their loans forgiven under the Paycheck Protection Program.
The new law states that forgiven debt won’t be counted as taxable income, according to The Wall Street Journal. The law does not clarify, though, whether the expenses for salaries and other costs still trigger deductions, as they do under typical circumstances.
If employers can’t claim the expenses as deductions, the value of the program will be limited. However, if business owners can deduct the expenses, the deductions can offset other income generated during this time. Per the Journal, even if businesses report tax losses now, they can use other provisions of the new law to use those losses against prior years’ profits and claim refunds.
“The bottom line is they’re going to have to clarify this and clarify it very quickly,” said Tony Nitti, an accountant at RubinBrown LLP, told The Journal. “People need to know that information now that are borrowing.”