PPP LOAN FUNDS

[ramraor]

Filed 1120 for the period 2019-20, took reduction in salaries/other exp. for PPP funds received in the amount of $ 33,000/-  tax treatment implication when filing for Amended 1120 tax return filing -  how to take  offset for reduction in salaries/expenses as also received letter for forgiving PPP funds in the middle of 2020 period.  pls guide for treating the items for 1120 amended tax return  as also for loan forgiveness to be treated as exempt income - to be  treatment under M-1 and M-2 schedules.

pls guide - I am in the midst of filing 1120 Amended tax return

[dd4vols · Accepted solution]

For your AMENDED return.  First, add back those reductions you took in salaries/other expenses. The IRS finally came around and ruled you could deduct those even if PPP funds were used to pay them. Second, on page 6, in the M-1 section, on all that I did, I went to line 7 and entered "Cares Act -- SBA PPP Funds (see Attached) " and of course, then the amount on that line.  I attached a very plain statement to the effect that the taxpayer received $xx,xxx Payroll Protection Program funds, and that loan was completely forgiven.

There should not be a M-2 adjustment, as those forgiven PPP funds would/should show up on the income statement after forgiven (albeit as Non-taxable Income).