Initially, the IRS disallowed business deductions for expenses paid with proceeds of a PPP loan, but late in 2020, Congress specifically authorized those deductions. However, some businesses filed tax returns relying on the initial guidance from the IRS. The IRS has now released a safe harbor mechanism that allows businesses that did not deduct those expenses on their 2020 tax returns to deduct them on their 2021 tax returns. This allows businesses to reap the benefit of those deductions without filing an amended tax return.
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