Last Chance Forgiveness

Tax season is still getting shot in the arm (pun intended) by pandemic legislation, most notably the Paycheck Protection Program (PPP) loans.

If your business participated in the PPP, you’ve likely been unsure about how to account for PPP loan forgiveness income on your tax return. Did your loan forgiveness occur when you paid the required expenses, when you submitted your loan forgiveness application, or when the government formally approved the loan forgiveness application? Recently, the IRS provided guidance on this debate, and taxpayers can choose any of these options.

As a reminder, in December 2020, the IRS announced that any eligible expenses you paid with money from those PPP loans can be deducted from your taxable income. And because PPP ended in May 2021, those deductions can be applied to this tax season. Examples of which include rent/lease payments, business utility payments, covered property damage costs, and interest payments on (most) business loan obligations. That said, you’ll have to get your loan forgiveness application approved by the Small Business Administration before you’re off the hook for the amount you borrowed.

This article is intended to provide basic information for starting a discussion with a financial professional about your specific financial situation. Please consult with a financial professional regarding your specific financial situation before making any financial decisions.

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