@nongkangma
Payroll expenses paid from PPP loan proceeds are taxable income to the recipient. Payroll expenses include the following:
- Gross salary or wage
- Tips
- Gross commissions
- Paid leave (vacation, family, medical or sick leave, not including leave covered by the Families First Coronavirus Response Act)
- Allowances for dismissal or separation paid
- Employee benefits costs (including retirement contributions).
On December 27, under the Consolidated Appropriation Act, 2021 overrode the IRS position and stated that taxpayers whose PPP loans are forgiven are allowed deductions for otherwise deductible expenses paid with the proceeds of a forgiven PPP loan.
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