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Your error is a known issue and we are working to resolve this. There is a workaround for this so you do not have to delay filing your return.
Please follow these steps:
Your error is a known issue and we are working to resolve this. There is a workaround for this so you do not have to delay filing your return.
Please follow these steps:
Worked perfectly. You rock!!! Thank you.
Not sure this solution works. The expenses related to PPP forgiveness are tax deductible. Unlike usual, while these are deductible they are also expenses related to tax-exempt income (see IRS guidance below) so they offset the tax-exempt PPP income in OAA on M-2. If the expenses are tax deductible they should not be a permanent difference unless there is an offset on the M-1, correct? To compensate for this, I did the following instead of step 5 described in the solution:
1. added another line on M-2 worksheet additions for "Expenses from forgiven PPP" and overrode the amount to put it in the AAA column instead of OAA
2. Also put the expenses on the M-1 worksheet on the "Other expenses related to tax-exempt income line"
This way the expenses are appropriately reported as deductible and as a reduction of OAA rather than AAA. IRS guidance follows:
Per the M-2 instructions in the 2021 IRS 1120-S instructions, "If column (a) on line 2 or line 4 of the
Schedule M-2 includes expenses paid with proceeds from forgiven PPP loans, an
S corporation should report that amount in column (a) on line 3 and in column (d) on line 5 of the Schedule M-2. " This same guidance applies to prior year expenses included in M-2, column (a), line 1.
Thank you so much!
I agree. Turbotax work around solution does not report it correctly. Does the existence of a PPP loan cause an S-Corp be required to file M-1, M-2 or M-3 if that S-Corp is otherwise not required to complete these sections?
Yes, depending on how you have decided to recognize the expenses associated with the loan. Per the IRS:
An S corporation should report certain information related to a PPP loan. The forgiveness of a PPP loan creates tax-exempt income, which in turn affects a shareholder's basis in the S corporation. Rev. Proc. 2021-48 permits S corporations to treat tax-exempt income resulting from the forgiveness of a PPP loan as received or accrued (1) as, and to the extent that, eligible expenses are paid or incurred; (2) when the S corporation applies for forgiveness of the PPP loan; or (3) when forgiveness of the PPP loan is granted. See Schedule B, Question 12; Schedules K and K-1, lines 10 and 16(b); and Schedules M-1, M-2, and M-3, later, for PPP reporting instructions.
Please see Instructions for Form 1120-S for more specific instructions for the different schedules.
But, we non Tax Experts, shouldn't have to do all this research. I have spent more time on this than on getting the Actual PPP Loan and then getting Forgiveness. This is why I pay for Turbotax Business, so that I could answer that I had a loan and it was Forgiven, and then Turbotax would put it where it needs to go and I could file my taxes without everything being overwritten or delayed. It doesn't sound like we can expect a fix for this before March 15th?
This is how I worked around it (after countless hours of trying) For S-corps that DO NOT complete Schedules L, M-1 and M-2:
Under business info - PPP Loan: answer yes and input info for PPP Loan (Turbotax quick fix advises to answer NO as their step one to fix)
In Forms: Sch M-1 Wks shows error. Click on “Sch M-1 Wks” Enter zero in the per books column for Tax-exempt interest AND for the first line under “Other permanent income items” No description needed. this causes error to disappear!
For the PPP Loan Statement:
in Forms click on Form 1120S p3-5 Scroll down to where your Forgiven PPP Loan shows and click on QuickZoom to required PPP loan forgiveness statement and complete the info to generate the statement
For what it is worth, I have been monitoring everything that I can find concerning PPP in Turbotax Biz. I have tried every proposed solution and workaround. The solution provided by JF142, was the only one that made the most sense to me, in that it didn't mess with the Reconcile of the Balance Sheet, cause Errors and the M1 & M2 appeared best for me in that it didn't end up with a loss that affected my K1 and State Taxes, etc. etc. It could still be wrong, but it is what I am going with since Turbotax has not seen fit to correct the software, by the Federal filing date which is tomorrow 3/15/22. Thank You JF142!
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