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IRS Revenue Procedure 2021-20 Provides Relief for Some PPP Recipients

04.26.2021

On December 27, 2020, the Consolidated Appropriations Act (CAA) was enacted to provide clarification on the tax treatment of forgiven PPP loans – notably that expenses are deductible when paid from forgiven PPP funds.

As such, PPP borrowers who filed tax returns prior to CAA and based on guidance issued by the Treasury Department and the IRS prior to December 27, 2020, likely did not deduct certain otherwise deductible expenses paid or incurred during the taxpayer’s taxable year(s) ending after March 26, 2020, and on or before December 31, 2020. 

Under the safe harbor afforded by Rev. Proc. 2021-20, these taxpayers may deduct certain expenses in the immediately subsequent taxable year. Section 3.03 of the Rev. Proc. specifically identifies expenses not covered by the safe harbor as:

  1. Those expenses added to ‘covered expenses’ under the Economic Aid Act
  2. Expenses incurred as part of PPP Second Draw Loans

Rev. Proc. 2021-20 obsoletes Revenue Procedure 2020-51. Click here for the full text of Revenue Procedure 2021-20, which will appear in IRB 2021-19, issued on May 10, 2021.

If you have questions or need assistance, please feel free to reach out to Jen at 636.754.0230 or jvacha@bswllc.com, David at 314.983.1304 or dkillion@bswllc.com, or Bianca at 314.983.1365 or bsarrach@bswllc.com.

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