The IRS guidance was changed in legislation passed at the end of December that allowed the deduction of such expenses despite the receipt of PPP loans. Under the safe harbor provided by the IRS, a taxpayer that filed its 2020 tax return prior to the change in law can elect to deduct these expenses on the taxpayer’s timely filed return for the immediately subsequent taxable year rather than filing an amended return for the taxpayer’s 2020 taxable year. The IRS notice provides that such safe harbor election should be made by attaching a statement titled “Revenue Procedure 2021-20 Statement” that would include the required information to the applicable tax return.
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Author Sarah Herman is an associate in the tax department at Klehr Harrison.