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April 23, 2021

IRS provides safe harbor for businesses that received PPP loans in 2020 but, in keeping with then-current guidance, didn't deduct certain expenses

The IRS has announced (IR-2021-91) new guidance (Revenue Procedure 2021-20) that provides a safe harbor for certain businesses that received a loan under the Paycheck Protection Program (PPP) but did not deduct any of the original eligible expenses because they relied on guidance issued before the COVID-related Tax Relief Act of 2020 was enacted on December 27. The safe harbor allows these taxpayers to elect to deduct certain expenses paid or incurred during the tax year ending after March 26, 2020 and by or on December 31, 2020 that resulted in, or were expected to result in, forgiveness of the loan.