States are taxing PPP Loan Forgiveness

Important information on states taxing PPP Loan forgiveness

Despite the federal intent to excuse PPP Loans from qualifying as taxable income, many states are doing just that. For instance, Utah requires businesses to pay taxes on the portion of PPP loans that have received forgiveness. The Utah tax assessment occurs in the year the loan forgiveness is received.
However, PPP expenses are fully deductible. To see how your state is affected, check out the Tax Foundation’s comprehensive list.

Typically, when businesses receive loan forgiveness, it qualifies as taxable income. Under the CARES Act, the PPP Loan is counted as nontaxable for federal income tax purposes. Earlier, the IRS and Treasury had decided to count PPP Loans as taxable income. However, President Trump signed HR 133 into law on December 27th, 2020, essentially reversing the decision. The last-minute legislation waived taxes on PPP loans. Again, some states now require businesses to pay taxes on forgiven PPP Loans.

Bonus

The new COVID-19 relief bill signed by President Biden on Thursday, March 11, 2021, will base stimulus payments off of 2019 income unless taxpayers have already submitted their 2020 tax return.  If you were impacted negatively by COVID-19 it likely will be to your advantage to submit your return as soon as possible.

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