How to enter the PPP forgiveness on 1120S Sch M-2

Forum|Forum|4 years ago
January 28, 2022
2 replies
1 view

Based on the 1120 S instructions the PPP forgiveness amount is tax exempt income reported on M-2 OAA column d. This can only be done by putting the amount in the tax exempt interest line. How do we account for the expenses paid in current year using PPP funds? The instructions say it should be in M-2 column a and line 5 column d. Can't seem to get these adjustments into Proseries without error and throwing my M-1 off.

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Samih

Level 2

Has anyone figured this out yet? Having the same problem.

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acookAuthor

Level 2

No but I'm hoping I hear from someone as I have a large amount of S Corps ready to go just waiting on how to handle this.

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StephanieS

Level 3

I'm having the same problem as well. The IRS 1120-S instructions https://www.irs.gov/pub/irs-pdf/i1120s.pdf state "If column (a) on line 2 or line 4 of the Schedule M-2 includes expenses paid with proceeds from forgiven PPP loans, an S corporation should report that amount in column (a) on line 3 and in column (d) on line 5 of the Schedule M-2.

Line 3 is fine in ProSeries, but I can't get it on Line 5 without getting errors.
How do we input the expenses paid from forgiven PPP loans on M-2?

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acookAuthor

Level 2

We have a work around that we've been doing just to get the returns out the door.

Print your M-2 for ref, then for your M-2 worksheet options :

-compute M-2? YES

-use automated Schedule M-2/Retained Earnings Worksheets? NO

Go in and manually fill in the M-2, the balance sheet retained earnings and the Sch K 16d, if applicable. Adding PPP to Line 3 column a and d and line 5 column d.

This effectively wipes out the OAA and increases the AAA account.

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StephanieS

Level 3

Thank you! I thought about doing that yesterday but thought I was just missing something!

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