Groton salon owner Chris Goslin said she struggled to get a Paycheck Protection Program loan. She said looking back at it now, she never would have taken one if she knew about the tax consequences.
It’s a nasty surprise for some business owners.
When we last spoke with Goslin in April, she was battling to get a small forgivable Paycheck Protection Program, or PPP loan from the federal government.
Goslin said it helped keep her salon afloat during the pandemic when she had to close down.
“You could use it for all of payroll or you could use it for some payroll and some predetermined expenses that were appropriate for business including rent, utilities,” Goslin said.
Now Goslin has learned she will not be able to deduct the expenses she paid with the forgivable loan.
Goslin said those are normally big deductions she takes for her business taxes.
“Maybe in a normal year if somebody handed me $10,000 and said ‘Here pay your bills with it’, then sure, I’d be coming out ahead, but the problem is, this is not a normal year. I was closed by no doing of my own.”
Word of this IRS rule came down November 18.
It’s a gut punch to small and minority owned businesses already struggling, said Ashley Harrington with the Center for Responsible Lending.
“It’s just one thing after another that businesses that are already stretched in so many different ways are having to navigate and contend with," Harrington said.
The IRS did offer a bit of good news - they clarified for NBC Connecticut Investigates that PPP recipients like Goslin can deduct payroll and expenses for most of the year, just not the period when they used PPP to pay for them.