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Dec 24, 2020 · The deduction for expenses paid or incurred from PPP proceeds may be limited due to inadequate tax basis or amounts at risk. If the PPP loan is not forgiven or deemed forgiven in the same year, unexpected results may occur due to timing differences between 2020 and 2021.
The IRS recently released guidance (Rev. Proc. 2021-48 and Rev. Proc. 2021-49) on the timing of gross receipts and tax-exempt income from the forgiveness or partial forgiveness of Paycheck Protection Program (PPP) loans.
Apr 1, 2022 · According to the instructions for the 2021 Form 1120-S, U.S. Income Tax Return for an S Corporation, expenses paid with PPP loans that are forgiven reduce the other adjustments account (OAA). Since the forgiveness of a PPP loan results in tax - exempt income, AAA will not be increased by the amount forgiven; instead, OAA will be increased.
Jul 1, 2022 · Assume the shareholders receive a basis increase when the PPP loan is forgiven in 2021, which may free up the suspended loss. However, because distributions exceeded AAA, the shareholders have received taxable dividends, despite X' s having sufficient tax basis in X' s stock.
Nov 18, 2021 · In three revenue procedures (Rev. Procs. 2021-48, 2021-49, and 2021-50) the IRS provided guidance Thursday on the treatment of amounts excluded from taxpayers' gross income in connection with forgiveness of Paycheck Protection Program (PPP) loans.
Rev. Proc. 2021-48 is effective for any tax year in which a taxpayer paid or incurred eligible expenses, any tax year in which the taxpayer applied for forgiveness of a PPP loan, or any tax year in which the taxpayer’s PPP loan forgiveness is granted.
Dec 3, 2021 · Rev. Proc. 2021-48 addresses the timing of the recognition of tax-exempt income arising from forgiveness of PPP loans. Taxpayers are given the option of treating this income as received or accrued at any of the following times: When expenses eligible for forgiveness are incurred or paid, When an application for PPP loan forgiveness is filed, or
Jan 6, 2022 · But is this treatment correct? No. On December 22, 2021, the IRS released draft instructions for Form 1120-S (annual S Corporation income tax return) stating that the OAA should include both the PPP tax-free income and the expenses giving rise to forgiveness.
Nov 23, 2021 · Rev. Proc. 2021-48 provides guidance with respect to the timing of receipt of PPP forgiveness tax-exempt income. Such income is treated as received or accrued when either (1) expenses eligible for forgiveness are paid or incurred; (2) an application for PPP loan forgiveness is filed; or (3) PPP loan forgiveness is granted.
Answer: Yes. All PPP lenders may accept scanned copies of signed loan forgiveness applications and documents containing the information and certifications required by SBA Form 3508, 3508EZ, or lender equivalent.
