The Treasury Department and the Internal Revenue Service on Monday issued guidance allowing deductions for the payments of eligible expenses when such payments would result or be expected to result in the forgiveness of a covered loan under the Paycheck Protection Program.
The guidance reflects changes to law contained in the COVID-related Tax Relief Act of 2020, which was signed into law Dec. 27, 2020.
The COVID-related Tax Relief Act of 2020 amended the CARES Act to say that no deduction is denied, no tax attribute is reduced and no basis increase is denied by reason of the exclusion from gross income of the forgiveness of an eligible recipient’s covered loan. This change applies for taxable years ending after March 27, 2020.
The ruling makes previous guidance obsolete. This obsolete guidance disallowed deductions for the payment of eligible expenses when the payments resulted or could be expected to result in forgiveness of a covered loan.
For more, visit IRS.gov