For 2021 the IRS requires you report the expenses you paid with your forgiven funds and you report those expenses for 2020 if your 2020 funding was forgiven in 2021.
The questions are in regard to when you recognized the expenses that were covered by the PPP funds:
- if you claimed the expenses when you paid them
- if you claimed the expenses when you applied for forgiveness
- or if you claimed the expenses when you were granted forgiveness
So this really matters if you had a 2020 loan that wasn't forgiven until 2021, but if you recognized the expenses on your 2020 tax return your answer is 1 (for example).
If you are filing your 2021 return and you have not yet received notification that your loan is forgiven, you will answer "PPP forgiveness not granted at the time of filing the return".
@kmnapoli
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