1120-US: Paycheck Protection Program (PPP) loans for corporations

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Proceeds:

Forgiven PPP loan proceeds are excluded from taxable income and are treated as tax-exempt income. For S-Corporations, the forgiven PPP loan proceeds increase the shareholder's basis in the S-Corporation stock and increase the Other Adjustments Account (OAA).

Expenses:

Eligible expenses paid with forgiven PPP loan proceeds are fully deductible. For S-Corporations, expenses paid with forgiven PPP loan proceeds should not reduce the Accumulated Adjustments Account (AAA). These expenses instead reduce the OAA.

Additional reporting statement:

The 2021 Form 1120 and Form 1120-S instructions require additional reporting for corporations that have tax-exempt income resulting from the forgiveness of a PPP loan. The following information must be included in a statement with the tax return:

  1. The corporation’s name, address, and EIN;
  2. A statement that the corporation is applying or applied section 3.01(1), (2), or (3) of Rev. Proc. 2021-48 as applicable;
  3. The amount of tax-exempt income from forgiveness of the PPP loan the corporation is treating as received or accrued; and
  4. Whether forgiveness of the PPP loan has been granted as of the date the return is filed.

UltraTax CS prints this information in a required statement based on the data entered in the statement dialog attached to the PPP loan forgiveness field in Screen Mc or Ms in the Balance Sheet folder.

Electronic file:

UltraTax CS automatically includes the additional reporting statement in the electronic file when you enter data in the statement dialog attached to the PPP loan forgiveness field in Screen Mc or Ms.

Data entry for PPP loans for C and S-Corporations:

PPP loans included in book income and Schedule M-1 is printing

  1. Go to the Mc or Ms screen, in the Balance Sheet folder.
  2. Enter data in the statement dialog attached to the PPP loan forgiveness field.
  3. For an S-Corporation, enter expenses in the Current year expenses paid from forgiven PPP loans and/or the Prior year expenses paid from forgiven PPP loans in Screen Ms.

UltraTax CS reporting of data entry:

  1. Forgiven PPP loan proceeds is reported on Schedule M-1 as income on books not on return.
  2. For an S-Corporation, forgiven PPP loan proceeds is also reported on
    1. Schedule K, line 16b
    2. Schedule K-1, Box 16B
    3. Shareholder’s Basis Worksheet, Page 1, Line 7
    4. Schedule M-2, line 3(d)
  3. For an S-Corporation, both current-year and prior-year expenses paid with proceeds from forgiven PPP loans are reported on Schedule M-2, lines 3(a) and 5(d).
  4. A required statement based on the data entered in the PPP loan forgiveness statement dialog.

PPP loans included in book income and Schedule M-3 is printing

  1. Go to the Mc or Ms screen, in the Balance Sheet folder.
    1. Enter data in the statement dialog attached to the PPP loan forgiveness field.
    2. For an S-Corporation, enter expenses in the Current year expenses paid from forgiven PPP loans and/or the Prior year expenses paid from forgiven PPP loans in Screen Ms.
  2. Go to the M3-2 or M3S-2 screen
    1. Click on the statement dialog attached to the Other income(loss) items with differences field. Enter forgiven PPP loan proceeds as a positive amount in the Income Statement column and as a negative amount in the Permanent Difference column.
    2. For an S-Corporation, enter forgiven PPP loan proceeds in statement dialog attached to the Schedule M-2 other additions field in Screen M3S-2. Select code O in the Sch M-2 column in the statement dialog.

UltraTax CS reporting of data entry:

  1. Forgiven PPP loan proceeds is reported on Schedule M-3, page 2 as Other income (loss) items with differences.
  2. For an S-Corporation, forgiven PPP loan proceeds are also reported on:
    1. Schedule K, line 16b
    2. Schedule K-1, Box 16B
    3. Shareholder’s Basis Worksheet, Page 1, Line 7
    4. Schedule M-2, line 3(d)
  3. For an S-Corporation, both current-year and prior-year expenses paid with proceeds from forgiven PPP loans are reported on Schedule M-2, lines 3(a) and 5(d).
  4. A required statement based on the data entered in the PPP loan forgiveness statement dialog.

PPP loans not included in book income

No data entry is needed on the Mc/Ms or M3-2/M3S-2 screens since the forgiven PPP loan proceeds is not taxable income. The Book / Tax reconciliation item is not needed if the forgiven PPP loan proceeds is not included in the book income.

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