The IRS released guidance clarifying the tax treatment of expenses when a PPP loan has not been forgiven by the end of the year the loan was received. The guidance revenue ruling and revenue procedure explain that since businesses are not taxed on the proceeds of a forgiven PPP loan, these expenses are not deductible. Since the practice has not paid anything out of pocket, it results in neither a tax benefit nor tax harm.
If a practice reasonably believes that a PPP loan will be forgiven in the future, expenses related to the PPP loan are not deductible, whether the business has filed for forgiveness or not. In the case where a PPP loan was expected to be forgiven, and it is not, businesses will be able to deduct those expenses.
Note the Department of Treasury has continually modified PPP program guidance since the start of the program. We recommend working closely with your tax professionals and legal counsel to assess how these changes impact your individual practice.