…OR HOW THE IRS SCREWS TAXPAYERS EVEN WHILE ON FURLOUGH.
Kick them while they are down!!!!
Unbelievable, cruel, ruthless and many other adjectives I wish I could think of for the recent IRS ruling under notice 2020-32 https://www.irs.gov/pub/irs-drop/n-20-32.pdf
The CARES act specifically in the law stated that the loan forgiveness in the PPP Program would not be treated as income. Normally, cancellation of debt is treated as income, but again, the CARES act specifically said it is not income in this case.
So, while the IRS is on furlough, someone sitting at home apparently searched for a way to circumvent the CARES act with a definition that in laymen’s terms says if you are forgiven debt, you can’t deduct the expenses for which the debt was forgiven.
The result is the same. No deduction is as good as creating income in this case.
Most of the tax world is upset over this decision. The AICPA stated: “In effect, the IRS guidance means that the taxability provision [Section 1106(i)] has no meaning. Why waste the ink to say that, for purposes of the Code, the loan forgiveness is not includible in income if the government will just take away deductions in the same amount?”
In my opinion, a responsible IRS would have approached Congress with this information and suggested some relief on this matter instead of issuing this notice. Ah, but responsible and IRS in the same sentence must be an oxymoron.
We know that many of you took the time to weigh whether the PPP loan or going on unemployment made sense. This awful decision turns that issue upside down.
There is hope: Some congressmen are up on arms over this decision and may pass legislation to correct this travesty. Thank the IRS for Congress having to waste time on this matter.
We will keep you posted on any changes on this ridiculous decision.
Our original post, IS THE PPP LOAN FOR YOU, can be found here.