Reporting PPP Forgiveness

As discussed in our post on November 22, 2021, the IRS has provided guidance on when entities who receive forgiveness of Payroll Protection Program (PPP) loans should report the tax-exempt income from those loans.

The instructions for the 2021 versions of Form 1120S and Form 1065 indicate that entities that report tax-exempt income from the forgiveness of PPP loans must attach a statement to their returns for the year in which that tax-exempt income is reported.

The statement must include: (1) The name and taxpayer identification number of the entity.  (2) A statement that the entity is applying section 3.01(1), (2) or (3) of Revenue Procedure 2021-48, as applicable.  (3) The amount of tax-exempt income from forgiveness being treated as received or accrued during the tax year.  (4) Whether forgiveness of the PPP loan has been granted as of the date the return is filed. 

When selecting the applicable section of Revenue Procedure 2021-48, section 3.01(1) applies when entities use the safe harbor provisions set forth in Revenue Procedure 2021-20.  Section 3.01(2) applies when entities recognize the tax-exempt income from the forgiveness of the PPP loan in the year when the application for forgiveness has been filed, and Section 3.01(3) applies when entities recognize the tax-exempt income from the forgiveness of the PPP loan in the year when the forgiveness is granted.