Then in most cases, under Revenue Ruling 2020-27, the expenses will not be deductible in the year incurred if the safe harbor does not apply.
The deductions will likely to be permitted on any of the after:
The revenue procedure particularly covers the вЂњ2020 taxable yearвЂќ while the вЂњsubsequent year.вЂќ It’s reasonable to assume that the вЂњ2020 taxation yearвЂќ is read to suggest the income tax year where the PPP eligible expenses had been compensated or incurred.
LetвЂ™s take a good look at two examples:
The taxpayer filed their loan forgiveness application in 2020, asking for a full loan forgiveness of $200,000. The taxpayer had an expectation that is reasonable of loan forgiveness. Prior to IRS income Ruling 2020-27, the taxpayer filed their calendar year 2020 earnings income tax return without using deductions for otherwise qualified company costs in the quantity of $200,000.
In 2021, they receive notice from their loan provider that just $175,000 ended up being forgiven.