We issued an 80,000 loan to an employee in 2017 and have included a 4 year forgiveness schedule, with the first date of forgiveness being 12/31/2018. Do we issue him a 1099 for 2017 for the full 80,000? Or do we issue him a 1099 in 2018 for the amount of the forgiveness?
I would say "none of the above." You made a loan and loans are not reported on 1099-MISC's and you didn't incur a deductible expense. (I assume that you really dotted your i's and crossed all your t's in setting up this loan such that it's not considered immediate compensation by the IRS.) When you forgive a portion of the loan you've created compensation to the employee, compensation that gets reported on a W-2.
You add the amount of the forgiven loan to their W-2 box 1 income each year, and deduct the appropriate payroll tax (employer share of FICA and medicare tax), as well as federal and state withholding.
Basically, treat it as a cash bonus and apply the same withholding rules.
Because this is an employee, anything of value that you provide to an employee in return for their services is considered taxable wages.