Tax Issues Pertaining to COVID-19

Expenses Used for PPP Loan Debt Forgiveness:

On April 30th, the IRS issued Notice 2020-32 pertaining to the deductibility of certain otherwise deductible expenses when the taxpayer receives a Paycheck Protection Program (PPP) loan.  This Notice clarifies that no deduction will be allowed for expenses that result in the forgiveness of a PPP loan.  As a result, although the forgiven portion of the PPP loan is not included in taxable income, the expenses associated with the forgiveness are not tax-deductible.  The expenses are qualified payroll costs, rent, utilities, and mortgage interest during the 8-week period subsequent to the funding of the loan, subject to limitations.

However, some in Congress are pushing back, saying that expenses funded with a PPP loan should be tax-deductible, disagreeing with the IRS.  They believe the intent within the CARES Act was to make the debt forgiveness a tax-free event.  Senate Finance Committee Chair Chuck Grassley stated “The intent was to maximize small businesses’ ability to maintain liquidity, retain their employees and recover from this health care crisis as quickly as possible.  This Notice is contrary to that intent.”  House, Ways, and Means Committee Chair Richard D. Neal issued a statement saying “We are planning to fix this in the next response legislation”.  Stay tuned to see whether the IRS Notice stands or is overturned by Congress.

2020 Quarterly Estimated Income Tax Payments:

There has been much confusion surrounding the due dates of the estimated tax payments for individuals for 2020.  Both the IRS and the State of Montana have delayed the due date of payments otherwise due on April 15th to July 15th.  This includes both amounts due for 2019 and the 1st quarter estimated tax payments for 2020.  Additionally, both the IRS and the State of Montana have delayed the due date of the 2nd quarter estimated tax payments for 2020 from June 15th to July 15th.  The table below reflects the current due dates:

Amounts due for 2019 income taxes | IRS – July 15 Montana – July 15

1st Quarter 2020 estimated tax payment | IRS – July 15 Montana – July 15

2nd Quarter 2020 estimated tax payment | IRS – July 15 Montana – July 15

Our team continues to seek resources and updated information to assist you before, during, and after disasters, like the COVID-19 crisis. Please reach out to us with any questions! We are happy to help.

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