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REVENUE PROCEDURE PACKAGE OUTLINES TREATMENT OF PPP LOANS AND MORE

REVENUE PROCEDURE PACKAGE OUTLINES TREATMENT OF PPP LOANS AND MORE

It’s no secret that COVID-19 financial relief measures have helped businesses keep their doors open through nationwide shutdowns and strict guidelines for the prevention of the spread of the novel Coronavirus, but these measures have also left business owners (and taxpayers alike) confused about how these items would be treated for tax purposes. The IRS recently released a package of revenue procedures including Rev. Proc 2021-48, 2021-49 and 2021-50.

Rev. Proc. 2021-48: Timing issues
This revenue procedure gives taxpayers options on timing to report the Paycheck Protection Program (PPP) loan forgiveness as tax exempt income. Those options include:

  • When expenses are paid or incurred. (Note - if using the safe harbor to deduct expenses in the subsequent taxable year under Rev. Proc. 2021-20, the safe harbor also will determine when the expenses are deemed paid or incurred for purposes of Rev. Proc. 2021-48)
  •  When the PPP forgiveness application is filed, or
  • When the PPP forgiveness is granted

The guidance also:

  • Allows a taxpayer to file an amended return (administrative adjustment request (AAR) for partnerships) if they would like to change the period in which the income was originally reported.
  • Provides if the PPP is not fully forgiven and the taxpayer has already reported the full amount as tax exempt income on a return, an amended return is required to correctly report the amount of forgiveness income.

Rev. Proc. 2021-49: Allocation issues
This revenue procedure provides guidance to partnerships and consolidated groups regarding amounts excluded from gross income and deductions relating to the PPP and certain other COVID-19 relief programs.

Rev. Proc. 2021-50: Amended returns
This guidance allows eligible partnerships subject to the centralized audit rules under the Bipartisan Budget Act to file an amended return by December 31, 2021 rather than an AAR to take advantage of the newly released revenue procedures.

 

11/30/2021

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