During December 2021 IRS released Revenue Procedures 2021-48 dealing with the timing options for treating a PPP loan forgiveness as income.
Revenue Procedure 2021-48, Section 3.01 which says a taxpayer can treat the PPP loan as forgiven –
1) When the expenses are paid/incurred,
2) When the application for PPP loan forgiveness is filed, or
3) When the PPP loan forgiveness actually takes place.
The Revenue Procedure also requires ALL taxpayers to attach a disclosure statement to the tax return for the year the PPP loan forgiveness is being reported as income (even though nontaxable).
The statement is required to have (for each PPP loan):
1) “RP2021-48” at the top of the statement
2) The taxpayer’s name, address, and EIN/SSN.
3) Which of the above dates is being used (Section 3.01(1), (2), or (3)).
4) The year the taxpayer is treating this as forgiven.
5) The amount of the tax-exempt income.
6) Whether forgiveness of the PPP loan has been granted prior to the date the tax return is filed.
SAMPLE when treating a $10,000 loan as forgiven when it actually takes place (#3 above).
100 MAIN STREET
ANY TOWN, USA 00000
THE TAXPAYER RECEIVED A PAYCHECK PROTECTION PROGRAM LOAN FOR THIS BUSINESS AND IS APPLYING SECTION 3.01(3) OF REVENUE PROCEDURE 2021-48 IN TAX YEAR 2021.
THE TAXPAYER IS TREATING $10,000 AS TAX-EXEMPT INCOME FROM THE FORGIVENESS OF THE PAYCHECK PROTECTION PROGRAM LOAN. AS OF THE DATE THIS RETURN IS BEING FILED, THE PAYCHECK PROTECTION PROGRAM LOAN HAS BEEN FORGIVEN.