January 26, 2021
New York State has been quiet on its plans for handling Paycheck Protection Program (PPP) disbursements and expenses for tax treatment. But in an important clarification this month, the New York State Department of Taxation and Finance provided critical insight into its forthcoming interpretation of PPP.
Following the federal government’s lead, New York State has said that it will exclude forgiven loans from adjusted gross income calculations used to determine taxpayer income taxes. Similarly, the state has said that any expenses paid by the forgiven PPP loans are tax deductible.
The decision provides much-needed clarification to business owners who have taken advantage of the PPP program to bolster their businesses during the pandemic. It should also allay fears that New York State would force business owners to include their forgiven loans as income and disallow expenses paid with PPP funds, ultimately increasing their state tax burden.
Business owners who used the PPP program (and plan to use the second draw PPP) should be sure to seek forgiveness after they utilize their funds. They should also be sure to keep track of the expenses they pay with their PPP funds to ensure they’re properly accounted for at tax time.
As always, if you have any questions or would like to consult a Perlson professional about your tax planning and PPP loan(s), be sure to contact us at 516-541-0022.
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