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1120S and PPP forgiveness

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  • 1120S and PPP forgiveness

    Working on my 1120S but having trouble finding out the correct way to account for a forgiven PPP loan. I know it doesn't count as income, but since my distributions were greater than my income (not counting my forgiven loan), I'll have a large negative balance on Schedule M-2. Should I leave it like this, or do I need to make some sort of adjustment for the loan (like put it on line 3--other additions)?

  • #2
    It goes on the M1, line 5. With respect, you are playing with fire DIYing an s-corp return.
    Our passion is protecting clients and others from predatory advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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    • #3
      Why? Seems pretty simple (other than the PPP question). I paid an accountant an absurd amount of money to fill out a few lines last year. I'm basically duplicating what she did (which mirrors what WCI did on his post).

      After I posted my original question, I think I figured it out. I put the forgiven amount on line 16b of Schedule K and also on 5a of M1.

      Thank you.

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      • #4
        Originally posted by TKEM View Post
        Why? Seems pretty simple (other than the PPP question). I paid an accountant an absurd amount of money to fill out a few lines last year. I'm basically duplicating what she did (which mirrors what WCI did on his post).

        After I posted my original question, I think I figured it out. I put the forgiven amount on line 16b of Schedule K and also on 5a of M1.

        Thank you.
        Jmpo, good luck with price shopping. And if you paid the “absurd amount” to one particular advertiser here then, yes, you paid a stupid tax. If it happens to be our firm, you should have complained b/c we guarantee satisfaction or we’ll accept what you believe is the value you received.
        Last edited by jfoxcpacfp; 03-01-2021, 04:04 AM. Reason: Deleted snarky sentence, don’t know what I was thinking!
        Our passion is protecting clients and others from predatory advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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        • #5
          I have a single member LLC taxed as s-corp. Paid accountant for a few years to do 1120S. My return is so straightforward I started doing it myself in Turbotax Business.

          This year the PPP and forgiveness is oddball. Surprisingly hard to find info on where to put this - partly because CPAs don't have consensus.

          Best I could find:


          https://ttlc.intuit.com/community/bu...1771393/page/2

          https://proconnect.intuit.com/commun...erte/00/116409

          https://www.forbes.com/sites/anthony...h=31df3e557865


          Tony Nitti's Forbes article is great shows the tricky issues that can arise hence the playing with fire comment.

          There is still room for simple instructions with warnings. If forgiveness entered after draws by shareholder, could generate a capital gain tax. However, I don't think it needs to be a CPA secret where to account for simple PPP forgiveness within same year as loan. The lack of CPA answers probably involves liability concerns ala medical advice on the internet or maybe it's "too complicated for you hence I won't tell you".

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          • #6
            Originally posted by TKEM View Post
            Why? Seems pretty simple (other than the PPP question). I paid an accountant an absurd amount of money to fill out a few lines last year. I'm basically duplicating what she did (which mirrors what WCI did on his post).

            After I posted my original question, I think I figured it out. I put the forgiven amount on line 16b of Schedule K and also on 5a of M1.

            Thank you.
            Where'd you put the forgiven amount on the balance sheet? Nontaxable income under liabilities? Journal that to Equity or Retained earinings?

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            • #7
              Originally posted by beagler View Post

              Where'd you put the forgiven amount on the balance sheet? Nontaxable income under liabilities? Journal that to Equity or Retained earinings?
              Advice needed:

              I put forgiveness amount in nontax income. Then journaled the forgiven amount to shareholder equity to increase basis. OK?

              Now where to put ppp loan interest and it's forgiveness? I could just ignore it and not put it on the books. Or put it in nontaxable income and deduct the interest as an expense? That doesn't seem right - deduct something that is forgiven via a nontaxable grant. Or put the interest on m1 line 5 non-deductible expense?

              according to this article no one knows:
              https://www.agweb.com/opinion/do-you...20is%20allowed.

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              • #8
                For an 1120S, at least in our software (UltraTax), there is a code to enter PPP forgiveness and it flows through as a reconciliation item on Schedule M2. It should end up in column d in the OAA column of M2, probably the 1st time you’ve made an entry there.

                I c/n address the interest expense from home, w/h/t discuss how we’re handling when I get to office.

                You s/n/h to journal the forgiveness to increase basis. I have a feeling a lot of DIY form 1120S returns will be a bit of a mess this year but s/b acceptable as long as you’re not being taxed on the income (i.e. this is not a mortal wound).

                The above is IMPO and not to be taken as personal financial or tax advice.
                Our passion is protecting clients and others from predatory advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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