The IRS decided to say Happy Thanksgiving to everyone that received a PPP loan that their expenses used towards the forgiveness are non deductible and that those non-deductible expenses have to be taken in 2020 regardless if your loan gets forgiven in 2020 or 2021. Basically, this means your PPP loan is effectively taxable income in 2020.
This is not ideal for two reasons. 1- Congress had always intended for the PPP loan forgiveness to be a non-taxable event. The IRS has now made it clear their interpretation due to prior tax court cases and precedent makes it taxable income. 2- The IRS also decided that since businesses that received the PPP loan and used the proceeds in 2020 for the intention of forgiveness should have this taxable income event happen in 2020, regardless when you get the loan forgiven.
The silver lining here is that is this forces the hand of Congress to act to pass a law to make the PPP loan forgiveness non-taxable. There is one bill in the Senate and two in the House that are to correct this issue with the IRS, so hopefully, Congress can act and we won’t have to worry about this being taxable income ever. I am not sure when this will happen, but it should happen in the near future.