March 11, 2021
As you prepare to file your taxes, the Paycheck Protection Program (PPP) won’t play a factor in your liability if you live in New York State.
Earlier this year, New York State announced that it will follow federal guidance and will ensure PPP loans given to companies throughout the pandemic will be tax exempt at the state level. Additionally, businesses will be allowed to deduct the expenses they paid with the PPP funds, creating a tax-savings opportunity.
The decision, which follows similar decrees made by New Jersey and other states across the U.S., is an important step for the nearly 350,000 New York businesses that secured PPP loans last year. Those loans, which went to companies both big and small, totaled $38.7 billion.
Taxpayers had been asking questions ahead of the 2020 tax filing season on whether PPP loans would be tax-exempt. Under federal law, forgiven loans (many of the PPP loans businesses obtained have been, or will be forgiven) are considered taxable income. However, the Consolidated Appropriations Act, 2021 that Congress passed into law to extend the PPP program to a second draw also excluded PPP loans from that statute. In effect, the move allowed businesses to exclude PPP loan distributions from their income and include the expenses they paid with their loans to be deducted from their tax liability.
Well into 2021, however, some states hadn’t said whether they would follow the federal government’s lead, leaving taxpayers and businesses owners with questions unanswered. New York’s decision paves the way for New York business owners to sidestep additional taxes at a time when incurring such charges could be disastrous.
If you’re a New York business owner and have some questions about New York’s PPP decision, be sure to consult your Perlson LLP professional at 516-541-0022 to help you navigate this year’s tax landscape and develop a strategy that best suits your unique situation.
It’s hard to believe, but once again it’s time to think about year-end and all the things you need to do to be ready for the 2023 tax season