Required reporting statement for PPP forgiveness

Technical topics regarding tax preparation.
#1
gusser  
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Proc. 2021-48, sections 3.01(1),(2) & (3):

If a taxpayer is reporting PPP tax exempt income in the year forgiven, does this safe harbor really apply? Rev Proc 2021-48 3.01(3) is the regular way that we all thought we had to do. It seems contrary to the "safe harbor" since reporting it when forgiven isn't a part of the safe harbor, or is it? Maybe I don't know how to read the rev proc paragraphs...

"Attach a statement to the S corporation return for each tax year in which the S corporation is applying Rev. Proc. 2021-48, sections 3.01(1), (2), or (3)."

So does this mean everyone regardless of the year they report the TE income has to fill out this statement?
 

#2
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In addition, if the S corporation's PPP loan was not forgiven in 2020 and the loan proceeds were not reported as exempt on the 2020 Form 1120S, does an amended return need to be filed to include the RP2021-48 statement?
 

#3
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It seems to me that every taxpayer that received PPP funds will have to file this statement. I just saw where it has to be attached to the individual returns as well. Per the 1040 instructions, page 23:
Forgiveness of Paycheck Protection Program (PPP) Loans
The forgiveness of a PPP Loan creates tax-exempt income, so although you don't need to report the income from the forgiveness of your PPP Loan on Form 1040 or 1040-SR, you do need to report certain information related to your PPP
Loan. Rev. Proc. 2021-48, 2021-49 I.R.B. 835, permits taxpayers to treat tax-exempt income resulting from the forgiveness of a PPP Loan as received or accrued: (1) as, and to the extent that, eligible expenses are paid or incurred; (2) when you apply for forgiveness of the PPP Loan; or (3) when forgiveness of the PPP Loan is granted. If you have tax-exempt income resulting from the forgiveness of a PPP Loan, attach a statement to your return reporting each taxable year for which you are applying Rev. Proc. 2021-48, and which section of Rev. Proc. 2021-48 you are applying—either section 3.01(1), (2), or (3).
Any statement should include the following information for each PPP Loan: 1. Your name, address, and ITIN or SSN;
2. A statement that you are applying or applied section 3.01(1), (2), or (3) of Rev. Proc. 2021-48, and for what taxable year (2020 or 2021) as applicable; 3. The amount of tax-exempt income from forgiveness of the PPP Loan that you are treating as received or accrued and for what taxable year (2020 or 2021); and 4. Whether forgiveness of the PPP Loan has been granted as of the date you file your return. Write “RP2021-48” at the top of your attached statement.
 

#4
gusser  
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Seaside CPA wrote:It seems to me that every taxpayer that received PPP funds will have to file this statement. I just saw where it has to be attached to the individual returns as well. Per the 1040 instructions, page 23:
Forgiveness of Paycheck Protection Program (PPP) Loans
The forgiveness of a PPP Loan creates tax-exempt income, so although you don't need to report the income from the forgiveness of your PPP Loan on Form 1040 or 1040-SR, you do need to report certain information related to your PPP
Loan. Rev. Proc. 2021-48, 2021-49 I.R.B. 835, permits taxpayers to treat tax-exempt income resulting from the forgiveness of a PPP Loan as received or accrued: (1) as, and to the extent that, eligible expenses are paid or incurred; (2) when you apply for forgiveness of the PPP Loan; or (3) when forgiveness of the PPP Loan is granted. If you have tax-exempt income resulting from the forgiveness of a PPP Loan, attach a statement to your return reporting each taxable year for which you are applying Rev. Proc. 2021-48, and which section of Rev. Proc. 2021-48 you are applying—either section 3.01(1), (2), or (3).
Any statement should include the following information for each PPP Loan: 1. Your name, address, and ITIN or SSN;
2. A statement that you are applying or applied section 3.01(1), (2), or (3) of Rev. Proc. 2021-48, and for what taxable year (2020 or 2021) as applicable; 3. The amount of tax-exempt income from forgiveness of the PPP Loan that you are treating as received or accrued and for what taxable year (2020 or 2021); and 4. Whether forgiveness of the PPP Loan has been granted as of the date you file your return. Write “RP2021-48” at the top of your attached statement.


Thanks Seaside. I read this but also read that especially with Schedule C where there should be no basis limitations that not filing the statement has no impact on the taxpayer. In other words, not filing the statement will not affect the outcome of the return (provided you actually have basis).
 

#5
oldguy  
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Seaside CPA wrote:It seems to me that every taxpayer that received PPP funds will have to file this statement. I just saw where it has to be attached to the individual returns as well. Per the 1040 instructions, page 23:
Forgiveness of Paycheck Protection Program (PPP) Loans
The forgiveness of a PPP Loan creates tax-exempt income, so although you don't need to report the income from the forgiveness of your PPP Loan on Form 1040 or 1040-SR, you do need to report certain information related to your PPP
Loan. Rev. Proc. 2021-48, 2021-49 I.R.B. 835, permits taxpayers to treat tax-exempt income resulting from the forgiveness of a PPP Loan as received or accrued: (1) as, and to the extent that, eligible expenses are paid or incurred; (2) when you apply for forgiveness of the PPP Loan; or (3) when forgiveness of the PPP Loan is granted. If you have tax-exempt income resulting from the forgiveness of a PPP Loan, attach a statement to your return reporting each taxable year for which you are applying Rev. Proc. 2021-48, and which section of Rev. Proc. 2021-48 you are applying—either section 3.01(1), (2), or (3).
Any statement should include the following information for each PPP Loan: 1. Your name, address, and ITIN or SSN;
2. A statement that you are applying or applied section 3.01(1), (2), or (3) of Rev. Proc. 2021-48, and for what taxable year (2020 or 2021) as applicable; 3. The amount of tax-exempt income from forgiveness of the PPP Loan that you are treating as received or accrued and for what taxable year (2020 or 2021); and 4. Whether forgiveness of the PPP Loan has been granted as of the date you file your return. Write “RP2021-48” at the top of your attached statement.



What happesn if the statement is NOT filed?
 

#6
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So does this mean everyone regardless of the year they report the TE income has to fill out this statement?. That's what it says.

In addition, if the S corporation's PPP loan was not forgiven in 2020 and the loan proceeds were not reported as exempt on the 2020 Form 1120S, does an amended return need to be filed to include the RP2021-48 statement?. It also reads that way, but I'd not bother on the basis of the general rule that an amended return is not needed if there is no change in tax.

As to oldguy's question, probably nothing but maybe correspondence. OR maybe if they want to push it, an incomplete return.
 

#7
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Per the 1120S instructions, line 16b:
An S corporation that didn’t report tax-exempt income from a PPP loan on its 2020 return may file an amended return to
apply Rev. Proc. 2021-48 and should do so according to these instructions. An S corporation that reported tax-exempt
income from a PPP loan on its 2020 return, the timing of which corresponds to one of the options presented in Rev. Proc.
2021-48, need not file an amended return solely to attach the statement that is described in the instructions for
Schedule K, line 16(b).
 

#8
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Nilodop wrote:…OR maybe if they want to push it, an incomplete return.


Agree. If push comes to shove on some issue, an incomplete could be a real possibility.
 

#9
JAD  
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How could the 2020 return balance without reporting the tax-exempt income? My returns show the income on Sch K, line 16b.
 

#10
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I'm thinking they are talking about the ones that did not report the PPP as income because they were waiting until forgiveness to bring it into income; therefore, it was shown as a loan on the books. However, now due to the Rev. Proc. they could go back and amend the tax return and then show the tax-exempt income.
 

#11
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Seaside CPA wrote:It seems to me that every taxpayer that received PPP funds will have to file this statement. I just saw where it has to be attached to the individual returns as well. Per the 1040 instructions, page 23:
Forgiveness of Paycheck Protection Program (PPP) Loans
The forgiveness of a PPP Loan creates tax-exempt income, so although you don't need to report the income from the forgiveness of your PPP Loan on Form 1040 or 1040-SR, you do need to report certain information related to your PPP
Loan. Rev. Proc. 2021-48, 2021-49 I.R.B. 835, permits taxpayers to treat tax-exempt income resulting from the forgiveness of a PPP Loan as received or accrued: (1) as, and to the extent that, eligible expenses are paid or incurred; (2) when you apply for forgiveness of the PPP Loan; or (3) when forgiveness of the PPP Loan is granted. If you have tax-exempt income resulting from the forgiveness of a PPP Loan, attach a statement to your return reporting each taxable year for which you are applying Rev. Proc. 2021-48, and which section of Rev. Proc. 2021-48 you are applying—either section 3.01(1), (2), or (3).
Any statement should include the following information for each PPP Loan: 1. Your name, address, and ITIN or SSN;
2. A statement that you are applying or applied section 3.01(1), (2), or (3) of Rev. Proc. 2021-48, and for what taxable year (2020 or 2021) as applicable; 3. The amount of tax-exempt income from forgiveness of the PPP Loan that you are treating as received or accrued and for what taxable year (2020 or 2021); and 4. Whether forgiveness of the PPP Loan has been granted as of the date you file your return. Write “RP2021-48” at the top of your attached statement.


So... based on this thread, many of us filed S Corps without this disclosure. Is that a fair statement?

I cant seem to date the Rev Proc but it appears to have been drafted after we would have filed.
 

#12
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southparkcpa wrote:So... based on this thread, many of us filed S Corps without this disclosure. Is that a fair statement?

I cant seem to date the Rev Proc but it appears to have been drafted after we would have filed.


These are instructions to the 1040, so my thinking is that this is meant for Sole Props & SMLLC taxed as a Sole Prop. The PPP forgiveness is reported on the S Corp on the tax exempt lines and in OAA. No where on the 1040 was there a place to report it before.
 

#13
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South Park, you are correct. I filed several 1120S returns with the forgiveness reported last year. Per the 1120S instructions I posted above, it appears that last year should be fine and nothing would need to be done at this point on those.
 

#14
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I cant seem to date the Rev Proc but it appears to have been drafted after we would have filed.

2021-48:
SECTION 4. EFFECTIVE DATE
This revenue procedure is effective for any taxable year in which a taxpayer paid or incurred eligible expenses, as described in section 2.01(2) of this revenue procedure, any taxable year in which the taxpayer applied for forgiveness of a PPP Loan, or any taxable year in which the taxpayer’s PPP Loan forgiveness is granted.


Internal Revenue Bulletin: 2021-49
December 6, 2021
. https://www.irs.gov/irb/2021-49_IRB#idm140370550038848
 

#15
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Nilodop wrote:I cant seem to date the Rev Proc but it appears to have been drafted after we would have filed.

2021-48:
SECTION 4. EFFECTIVE DATE
This revenue procedure is effective for any taxable year in which a taxpayer paid or incurred eligible expenses, as described in section 2.01(2) of this revenue procedure, any taxable year in which the taxpayer applied for forgiveness of a PPP Loan, or any taxable year in which the taxpayer’s PPP Loan forgiveness is granted.


Internal Revenue Bulletin: 2021-49
December 6, 2021
. https://www.irs.gov/irb/2021-49_IRB#idm140370550038848


Awesome..Thank you!!!!
 

#16
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warnickcpa wrote:
southparkcpa wrote:So... based on this thread, many of us filed S Corps without this disclosure. Is that a fair statement?

I cant seem to date the Rev Proc but it appears to have been drafted after we would have filed.


These are instructions to the 1040, so my thinking is that this is meant for Sole Props & SMLLC taxed as a Sole Prop. The PPP forgiveness is reported on the S Corp on the tax exempt lines and in OAA. No where on the 1040 was there a place to report it before.


Agreed… but if you read above, many are under the impression this is disclosure for the 1120S as well.

I had a full day, so ill read it later but I’m just amazed how they issue this stuff after the filing deadline

What a country.
 

#17
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southparkcpa wrote:
warnickcpa wrote:
southparkcpa wrote:So... based on this thread, many of us filed S Corps without this disclosure. Is that a fair statement?

I cant seem to date the Rev Proc but it appears to have been drafted after we would have filed.


These are instructions to the 1040, so my thinking is that this is meant for Sole Props & SMLLC taxed as a Sole Prop. The PPP forgiveness is reported on the S Corp on the tax exempt lines and in OAA. No where on the 1040 was there a place to report it before.


Agreed… but if you read above, many are under the impression this is disclosure for the 1120S as well.

I had a full day, so ill read it later but I’m just amazed how they issue this stuff after the filing deadline

What a country.



I think the new S-Corp Instructions have the statement requirement too now that I've dug into the issue...

Paycheck Protection Program (PPP)
reporting. Report tax-exempt income
resulting from the forgiveness of a PPP
loan on this line. Attach a statement to the
S corporation return for each tax year in
which the S corporation is applying Rev.
Proc. 2021-48, sections 3.01(1), (2), or
(3). The statement should also include the
following information for each PPP loan.
1. The S corporation’s name,
address, and EIN;
2. A statement that the S corporation
is applying 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 that the
S corporation is treating as received or
accrued during the tax year; and
4. Whether forgiveness of the PPP
loan has been granted as of the date the
return is filed.
 

#18
TAXESAM  
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Hello, so is this something that every entity who got a PPP frogiven need to complete when filing tax return? I efiled couple of S mall s corps without and they were accepted.... should I amend them ?
 

#19
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If the forgiveness of a PPP loan of a Schedule C (DRE or not) taxpayer creates tax-exempt income, I'm wondering if that income filters its way into other aspects of the 1040, such as MAGI in a calculation. It doesn't appear to affect MAGI for NIIT purposes, as best I can determine.

Does this PPP tax-exempt income affect any other tax, or income-inclusion, calculation on an individual's tax return that has its own definition of MAGI used in the calculation?
 

#20
oldguy  
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Verytaxing wrote:
Nilodop wrote:…OR maybe if they want to push it, an incomplete return.


Agree. If push comes to shove on some issue, an incomplete could be a real possibility.



with all due respect, I haven't seen this ever in 40 years ( including my time with IRS). I'll take my chances...
 

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