FARGO — Tax experts are worried about the potential impact to businesses if Paycheck Protection Program loans are taxable.
When the CARES Act passed earlier this year, businesses were given the loans to help with things like payroll. Lawmakers had said the loans are not taxable.
According to CPA Devon Liljenquist with Arrow Advisors in Fargo, the IRS is now saying the loans are taxable. If Congress does not clarify this before the next tax season, he worries this could hurt small businesses owners.
"So I think most of them, A, the money has already been spent, because it had to be spent to be forgiven, and B, they just don't have any plans of thinking it's taxable," Liljenquist said. "They think it's going to be a forgivable item that's not taxable."
He thinks business owners should start planning their budget in the event those loans are taxable, in case Congress doesn't clarify this in time.
"At a minimum, they should be preparing for what that tax liability could look like should Congress fail to get something passed," he said.
Liljenquist said companies with low margins, like restaurants, are especially at risk if these loans are taxable.