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"It's my understanding that the rules associated with forgiven debt still apply."
So far they don't for PPP loans. The loan forgiveness is not taxable.
But the expenses paid with the PPP loan money are not deductible (as of today 10/19/20).
I have no idea what, if anything, will be added to tax forms. I don't think many people will get PPP forgiveness in 2020. I think it will be a 2021 event.
"It's my understanding that the rules associated with forgiven debt still apply."
So far they don't for PPP loans. The loan forgiveness is not taxable.
But the expenses paid with the PPP loan money are not deductible (as of today 10/19/20).
I have no idea what, if anything, will be added to tax forms. I don't think many people will get PPP forgiveness in 2020. I think it will be a 2021 event.
Thanks! I know the forgiveness applications will start soon, but you make a goo point that the actual forgiveness decision won't happen until 2021.
Forgiveness update from last week:
"In its answer, found in Q&A No. 4 in the General Loan Forgiveness FAQs section, the SBA explains that borrowers may submit a loan forgiveness application any time before the maturity date of the loan, which is either two or five years from the loan’s origination, depending on the borrower’s agreement. But the SBA also reminds borrowers that loan payments are deferred only until 10 months after the last day of each borrower’s loan forgiveness covered period.
For example, the SBA wrote, a borrower with a covered period that ends Oct. 30, 2020, has until Aug. 30, 2021, to apply for forgiveness before loan repayment begins."
IRS notice for not including expenses for tax purposes when they are paid by PPP funds:
https://www.irs.gov/pub/irs-drop/n-20-32.pdf
You will see the payouts on deposits referred to as "grant advance loan" because there was no intent to report it for taxes, apparently.
Lender instructions not to report this as Loan or Debt forgiveness:
https://www.irs.gov/pub/irs-drop/a-20-12.pdf
This is a developing scenario, as usual.
You can watch all of this for yourself by bookmarking the SBA and IRS sites.
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