Some things I know about my return, PPP loan forgiveness, and TurboTax:
- I'm finishing up on 03/15/22, and TurboTax is still doing this incorrectly. No update has fixed it.
- TurboTax 2021 is for sure handling PPP loans differently than it did for 2020.
- It has an interview prompt about forgiveness.
- This populates to schedule M-2 line 7D "Distributions." This is wrong and unfortunately can affect your "Distributions in Excess of Retained Earnings" number, (depending on YOUR retained earnings and YOUR distributions). For me, if for sure did.
- What I did is just select "No" to using the M2/Retained Earnings Worksheet Amount. This allowed me to fill in the Schedule M2 correctly. Start with the values and lines that were auto-populating and just enter them. Distributions in line 7D are zero, as they should be for me. I added the line for loan expenses to 5d, per the IRS instructions. I even changed my line 1D, which was wrong because TurboTax handled this wrong in 2020, and because the IRS recently released guidance about PPP loan forgiveness and the Other Adjustment Account. I tried to include a statement with the explanation about this, but TurboTax refuses to included it with the return when I print, so oh well.
- In the end, my Other Adjustment Account is at zero, where it should be without PPP loans affecting it.
- When I didn't use the Worksheet amounts, in the error check, TurboTax made me move interest income from the worksheet where it originally was directly to Schedule K, line 4. No big deal.
- I was able to e-file.
I think (but am not 100% sure) that covers everything I did, but if you have questions, reach out and I can look at my return and worksheets for you.
TurboTax really needs to ask you if you got forgiveness, how much was used for expenses, and do all this for you. Insane that it doesn't. And not printing that supporting statement? Well that's just buggy.
Good enough for me! If the IRS wants to question anything, I'll let them. I seriously doubt it will be an issue.
