Taxpayer received a paycheck protection program (PPP) loan during 2020. Taxpayer was organized as an S Corp. Distributions from this loan caused stock basis to go below $0, and to be conservative, these excess distributions (around $20k) were reported as a STCG on Schedule D of the individual income tax return in 2020 (since stock was held less than one year).
Rev. Proc. 2021-48 was released AFTER 2020 returns were filed which gives the taxpayer the option to report the forgiveness as tax-exempt income "as eligible expenses are paid or incurred". So it sounds like the loan could have been deemed forgiven, which would help increase stock basis, and reduce the STCG taxes. However, 2021 returns have been filed since and the tax-exempt income was recorded in that year with a statement that section 3.01(3) was applied which states that tax-exempt income is recognized in the year "When the PPP Loan forgiveness is granted", which would be 2021.
So now that these returns have all been filed, I'm considering asking the taxpayer if they'd like to amend all of these returns (2020 & 2021) to apply the forgiveness to tax year 2020, which would help the taxpayer save approximately $5,700 in taxes. But my questions are:
1. Once an election is made to include the forgiveness in tax year 2021 via 3.01(3), is it possible to change that and apply the forgiveness to tax year 2020 via 3.01(1)? Or is that election irrevocable?
2. If so, considering there will be tax prep fees to file the amendments, which will cut into the tax savings, and because the IRS takes forever to process amended return refunds, is it even worth all of the trouble? The taxpayer will get this back eventually anyways, but it may be quite a while since this business is relatively new and the taxpayer is not close to retirement age.