Some small business owners may be in for a very unwelcome surprise when they pay their taxes this year.
“So many businesses I don’t think were expecting to have to have to include that in their income for the year, so this could cause a great big stir for a lot of people, it could shut some businesses down,” said Liz Crane, Tax Accountant of Liz Tax Service.
What tax accountant Liz Crane is talking about is a new ruling by the I.R.S. concerning small businesses that received Paycheck Protection Program loans, otherwise known as PPP.
The agency says those employers will have to include the amount of the loan they received as income on their 2020 taxes.
“The I.R.S. just made it official to where there’s no ifs ands or buts about it, that’s how they’re going to do it, so they want you to include it as income and you are not allowed to deduct those expenses for which it was intended for. But I don’t think it was necessarily spelled out so clearly when people went to get these loans,” said Crane.
The loans allowed companies to use that money to keep operating for an eight week period of time that started back on April 20. The loans covered expenses including payroll, rent, lease or utilities during that time frame.
The ruling affects any employer with less than 500 workers that received a PPP loan and then applied for and were granted forgiveness of the loan from the I.R.S.
Unfortunately, she says there won’t be any exceptions.