Paycheck Protection Program (PPP)

When Congress enacted this program, the intent was that proceeds from forgiven PPP loans would be tax-free, and that any expenses paid with PPP proceeds would also be deductible. This is contrary to the usual treatment of forgiven loans, which treats loan forgiveness as taxable income. Some states, but not all, are in conformity with the federal government’s treatment of PPP proceeds. The Tax Foundation has a map and chart that shows how PPP loan proceeds will be taxed across the U.S.

The SBA recently released new guidance for self-employed Schedule C filers that allows for PPP loans based on gross revenue instead of net income, as explained in the Journal of Accountancy. This guidance will allow self-employed persons to receive larger loans than under the previous rules. This expansion is available only for new first- and second-draw loans on a go-forward basis.

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