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Due to the devastating effects of COVID-19 on the economy, many small businesses had to shut their doors. Without a doubt, many more businesses would have closed had it not been for the intervention from the government in the form of PPP loans and EIDL loans from the SBA.

Many small business owners were able to benefit from those loans sometimes reaching hundreds of thousands of dollars. Understandably, many of those business owners are now worried about how those loans will affect their tax returns.

Many business owners mistakenly think that proceeds from their EIDL loan funds or their PPP loan funds are income towards their business. It’s not. From an accounting point of view, and more importantly, from the IRS point of view, those funds are considered a liability.

At the source of that confusion is the fact that in the early days of the PPP loans, it was said that if you got the loan forgiven, you could not deduct the expenses paid with the PPP loan, making it in essence taxable income. However, the IRS came out with new rulings.

According to current regulations, PPP loan funds and EIDL loan funds are not taxable income. If you need help navigating through the latest IRS rulings whether concerning PPP loan funds, EIDL loan funds, or other tax-related issues. We will be more than happy to assist you!

We are a full-service accounting firm that can help you with personal taxes, business and corporate taxes, and other financial ventures.