topic Re: Timing differences in Business & farm

Timing differences

Countingcat — Wed, 11 Feb 2026 03:08:31 GMT

Turbo Tax calculated a timing difference on my return last year and it is carrying over on this year's return. I have not idea what it is for. We use cash accounting. What are possible reasons for a timing difference? Should the amount show up on multiple years? I know that's kind of vague but any help is appreciated.

Re: Timing differences

Mike9241 — Fri, 16 Feb 2024 23:26:03 GMT

do you use quickbooks or other financial software for your business activities?

then its possible you're using the accrual method to see how you are actually doing financially but legally switch to cash basis when doing your tax returns.

Re: Timing differences

Countingcat — Sat, 17 Feb 2024 12:49:02 GMT

Thank you for the reply. We are using Quickbooks and set it up for cash accounting. The item, I discovered is the amount of forgiveness from the PPP we received. Should that amount remain on the return beyond the year in which it was received or should I remove it?

Re: Timing differences

Rick19744 — Sat, 17 Feb 2024 17:41:48 GMT

A couple of questions:

How is the PPP reflected on QB?
- Essentially, what was the journal entry when you received the funds
When did the forgiveness occur?
- Based on the limited facts, I'm assuming 2022?
What did you do in QB once the "loan" was forgiven?
What type of entity structure are we dealing with?

Re: Timing differences

Countingcat — Sun, 18 Feb 2024 00:28:06 GMT

We received the funds May 2020 and it was forgiven October 2020. It was recorded as other income in QB. I show a debit to a PPP Loan acct and a credit to a Non-taxable PPP loan forgiveness acct. On my 2020 1120s return it is on M-1 under Other timing income items.

Re: Timing differences

Rick19744 — Sun, 18 Feb 2024 00:50:30 GMT

This is technically what should have occurred:

I believe you have some years referenced incorrectly?
- Forgiven in October 2022?
But back to basics
In the year of receipt your should have a DR to cash and a CR for PPP Loan
Then as the funds were used DR Expense (wages most likely) and a CR to cash
Then when the loan was forgiven DR to PPP Loan and a CR to Income
The last entry would have eliminated the loan from the balance sheet and would have recorded income on QB.
Then when you prepared the tax return in TT, you appropriately had an M-1 for income on the books (QB) and not on the return.
Going forward everything should be good.
- Possibly when 2022 was prepared the M-1 was reflected as a timing difference instead of a permanent difference? As a result, TT is "thinking" there should be a reversal.
- However, there will be no reversal since this is a permanent difference.

Re: Timing differences

Countingcat — Sun, 18 Feb 2024 01:28:03 GMT

It actually was 2020. It has been showing up in 2021 and 2022 as an accumulated tax/book timing difference on the M2. Ironically my retained earnings weren't off until this year so I didn't notice it. Now I'm unsure as to how to correct it.

Re: Timing differences

Rick19744 — Mon, 19 Feb 2024 00:47:05 GMT

I'm a little confused on your reply:

The M-2 tracks actual S corp pass through items on an annual and then cumulative basis
Where exactly is this amount showing up?
In the year of forgiveness, this amount should have been reflected on the M-2 column (a) line 3
- This then arrives at a net figure on line 8 balance at the end of the year
- Then the following year line 8 amount should be reflected in column (a) line 1
- At this point, the figure is gone as it is just a part of the cumulative AAA

Re: Timing differences

Countingcat — Mon, 19 Feb 2024 12:03:21 GMT

I appreciate the follow up. Since I needed to amend the 2020 forms for the ERTC, I went ahead and corrected the entry for the PPP forgiveness on the M1 moving it from temporary timing to permanent. Then going forward it is correct.

Would love your expertise on the ERTC entries. I'm going to post a question separate for that. Information is scattered everywhere on that.

Re: Timing differences

Rick19744 — Mon, 19 Feb 2024 16:27:51 GMT

Welcome.

A separate thread is best.