PPP Loan Not Yet Forgiven

[Randall]

I thought this was discussed earlier but I can't find it.  If the PPP loan has not been forgiven yet but the application is in, do we just carry the loan on the balance sheet as of Dec 31, 2020 and wait for 2021 to record it as tax exempt income?

[BulldogTom]

NO.   IRS says it is forgiven at the end of the year regardless of the state of the application.   See the conversations in the Covid19 forum about this.

Tom
Modesto, CA

[Lee B]

1 minute ago, BulldogTom said:

NO.   IRS says it is forgiven at the end of the year regardless of the state of the application.   See the conversations in the Covid19 forum about this.

Tom
Modesto, CA

I believe that was the IRS position prior to the passage of the CAA just before the end of the year.

What do you do if the your client doesn't qualify for 100 % forgiveness because of FTE and etc and decides to carry the unforgiven portion as a 2 or 5 year loan.

I am definitely carrying these loans on my clients books until thy are officially forgiven by the SBA.

My second largest client's first PPP Loan may not be forgiven until next year plus due to FTE calculations I anticipate only about 80 % of the loan may be forgiven.

My client won' be deciding to repay the unforgiven portion or convert to a loan until that time which very well may be in early 2022.

[Lee B]

40 minutes ago, cbslee said:

I believe that was the IRS position prior to the passage of the CAA just before the end of the year.

 

Remember, that's when the IRS issued Notice 2020-xx stating that while the forgiven PPP Loans were not taxable, that the expenses paid with the loan proceeds were not deductible. Since the CAA passed allowing the deduction of these expenses, this IRS Notice is null and void. Since there are no timing difference issues any more,

there is no longer any reason not to leave the PPP Loans on the books, except for potential client credit rating concerns.

[BulldogTom]

26 minutes ago, cbslee said:

there is no longer any reason not to leave the PPP Loans on the books, except for potential client credit rating concerns.

Except for states like CA that are taxing the loan forgiveness.....

Tom
Modesto, CA

[Lion EA]

Wouldn't that be a reason NOT to report forgiveness before it actually happens, leave the PPP loans on the books for 2020 when they were NOT forgiven yet? Wait for the actual forgiveness amount in 20201 or beyond?

[Randall]

In my case, the client didn't apply for forgiveness until Feb, 2021.

 

[Lion EA]

(You all know I meant "2021 or beyond" at the end of my post...)

Randall has another reason to leave it as a loan on the books and on the tax return.

[BulldogTom]

On 3/31/2021 at 8:09 AM, Lion EA said:

Wouldn't that be a reason NOT to report forgiveness before it actually happens, leave the PPP loans on the books for 2020 when they were NOT forgiven yet? Wait for the actual forgiveness amount in 20201 or beyond?

Except CA, as of this minute, is following the original guidance from the IRS.   Because of the provision of the American Recovery Act that says you cannot lower taxes, CA is not finishing up legislation that would have made the forgiveness tax free in the state.   They are negotiating with Washington to see if they can get a waiver for conformity legislation.   So they are doing nothing until then.   I have to put it on for CA (or extend and hope for legislation and guidance).

I double checked this answer from the President of Spidell (CA tax experts where I get all my CA CPE).

Tom
Modesto, CA

[Lion EA]

So, if the loan was not forgiven until 2021 or not yet forgiven, leave it as a loan on the books for 2020 CA biz returns and deduct expenses as usual. If/when the loan is forgiven in 2021, report it on the 2021 return after CA has finalized its guidance, postponing the potential income &/or nondeductible expenses a year.

[Terry D EA]

I'm in NC and NC has not stated any position on this. So, I am doing as has been mentioned. The forgiveness application was not made available from the lender until two or three weeks ago with a message to complete it within 30 days which we did. So, I'm carrying it on the books as others have stated.