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@sellwanger wrote:

So if it is forgiven by 12/31/20 then it becomes tax-free income. No reduction of expenses, correct? And then what will you do on the 1120, an M-1 adjustment for permanent income adjustment? No one seems to be able to answer that question. 

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It's been answered many times in different ways.

Eligible expenses covered by PPP loans are deductible regardless of whether the loans will actually be forgiven, pursuant to §276(a) of the COVID-related Tax Relief Act of 2020 and Rev. Rul. 2021-2.

If the loan is, indeed, forgiven by the fiscal year end, it would then be written off the balance sheet, recognized as income on the books, and reconciled as a book-tax adjustment on M-1.  If it is yet to be forgiven, it stays on the books and there'll be no adjustment on M-1.