PORTLAND, Ore. (KOIN) — Businesses who benefitted from the Paycheck Protection Program may be greeted with a rude awakening around tax time.
Seen as a lifeline for businesses of various sizes, the loan guaranteed payroll money for employers. However, under new guidance from the Internal Revenue Service and the U.S. Department of Treasury, if the PPP loan is forgiven, businesses won’t be allowed to deduct things related to the loan. That means a business could not deduct things like payroll expenses, rent or utilities.
Steve Stegeman, a Gresham-based CPA with the firm Davis and Graves, says the guidance goes against what Congress intended when it created the program.
“In doing that the IRS really created an end-around Congress to create a backdoor way of taxing the loans, really,” Stegeman said. “We’re hearing from clients who may have made a different choice had they realized that this was not a truly tax-deductible, or tax free situation.”
Slabtown Barbershop owner Marty Caballero told NewsNation affiliate KOIN the PPP loan helped him stay open after losing three months of income during the first shutdown. Though his low employee count keeps him from worrying too much about tax implications, he says he knows others are and that owing more money next Spring could be detrimental for a business that is barely hanging on as it is.
“Being that we haven’t had any kind of like secondary round of help, with the fact that we’re on another shutdown, it seems like the least they could do is ‘OK, well, we’ll let you do that as some type of assistance since we’re not,’” Caballero said. “Doesn’t seem like we’re getting any other assistance.”