With legislation passed at the end of 2020, the IRS has officially reversed its prior guidance, Revenue Notice 2020-32, and will now allow federal income tax deductions for expenses paid with forgiven PPP loans. Previously, the IRS sought to avoid “double-dipping”, where if a taxpayer receives tax-free income (forgivable PPP loan proceeds), that taxpayer cannot also deduct expenses (expenses covered by the PPP loan proceeds) incurred in generating income. It is a long-standing principle of tax law. However, the IRS reversed its position consistent with current law. This allowance of “double dipping” applies only to relief programs under the CARES Act.