PPP forgiveness amount

Forum|Forum|4 years ago
February 19, 2022
3 replies
23 views

Sub-S Corp, filing 1120S. In 2020 received a PPP loan recorded as a liability on the balance sheet. In early 2021 the PPP loan was fully forgiven. The liability was eliminated, and forgiveness recorded as non-taxable income. In 2021 received an identical second PPP loan. This was forgiven in late 2021, the liability eliminated, and the forgiveness once again treated as non-taxable income. The second PPP loan was not on the books at the beginning or the end of the year and will not show up anywhere on the balance sheet. The first PPP loan is correctly eliminated from the balance sheet of the 1120S. However, on the M-1, double that amount is reported as non-taxable income for the forgiveness of both loans. Both entries are correct, I think, but it looks like I've doubled the non-taxable income. That screams red flag to me! Is there a better way to handle this?

AliciaP1

Alumni - Intuit

It is correct. Since both PPP loans were forgiven in 2021, both should be reported as non-taxable income.

However, there is a known issue with the Step-by-Step completing the M-1 correctly 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:

In Step-by-step mode, under Business Info click the About Your Business tab
Click Continue until you get to the Forgiven PPP Loan page and answer No.
Switch to forms mode, click on Sch M-1 Wks.
Under Other permanent income items add the description "PPP loan forgiveness" and the total dollar amount of both loans in the Per Books column.
Scroll down to Other permanent expense items, list the description "PPP funded expenses" and enter the amount of covered expenses for your 2021 PPP loan only.
On the left, click PPP Loan Stmt
Scroll to the bottom of the page and respond to the questions on the Smart worksheet listing both loans as 1 total amount forgiven in 2021.

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skibum11Author

Level 2

I have followed your instructions, but the 1120s balance sheet is out of balance. The ending Liabilities and Equity are understated by one PPP loan amount. Could you please review your instructions? Perhaps you could expand on your answer to my original inquiry. I suspect that I'm missing something.