PPP S-Corp Basis Adjustment M2

[lina]

PPP loan is added to Shareholder Basis.

In 2020 it was included on Sch M2 Colum (d) OAA.

But that does not add to their basis on M2.

Per M2 instructions 2021, it should be in column (a) line 3 if I am reading the instructions correct and they do get to add it to their basis.

Is Lacerte going to fix this or is there a reason we have to manually do this? 

[lesliechia]

Is this answer correct for handling the M2 difference?

[lina]

I know. I am nervous to pull the trigger or do I wait for an update in case of calculation issues later...

[lesliechia]

I figured out the issues I was having, I believe Lacerte is handling this correctly and no additional entries or overrides need to be made once you follow the directions on how to enter PPP forgiveness.

[lina]

I do not think it is. I have to manually (per instructions) adjust OAA to AAA in order for them not to have a negative Balance at Year end and take distributions since we were told PPP adds to their basis. 

[lesliechia]

Thank you so much for this, I understand the issue much better now.  I believe from my reading that you can only move over the amount of tax fee income that has been spent on business expenses, so this adjustment may not all happen in the year of forgiveness.  Is that your understanding?

[lina]

So sounds then like I am correct in doing this and Lacerte is not going to update has to be done manually?

PPP was forgiven and all of it 100% used for all eligible business expenses.

[lesliechia]

Lina, I think you are correct but I wish someone else would chime in here to confirm your understanding. 

I have read the IRS instructions as well as everything else I can find on this subject and I think this is the correct tax treatment. 

I believe you can move over the amount of tax fee income that has been spent on eligible business expenses.

[StknCPA]

Has there been an answer to this question? Will Lacerte add a checkbox or something that will computationally move PPP loan forgiveness from column d to column a of Schedule M-2?

S-corp returns are due in two days...

[lina]

I just followed the M2 instructions because that is all I could find that people did and no Lacerte response.