Is it common for companys to begin paying off PPP/SBA loans that were forgiven in a previous year? If the loan was removed from their books in the forgivess year (2021), and they begin making loan payments in 2023, how would you get the loan back on the books?

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Debit retained earnings and credit loan liability ?

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I’m not in tax so idk about all that haha

Why would you repay a loan that was forgiven under a government program?

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They’re going back and retracting forgiveness on loans that were previously forgiven due to re-auditing. I always knew these loans were a trap. But we’ve seen so much theft discovered in the aftermath so it seems valid

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The answer may be that you amend (or AAR) the prior returns to reduce the T/E income since the requirements for forgiveness were not satisfied. While the direct impact is nada since it is just reducing an item of T/E income, it could have ancillary impacts such as tax capital, 704(b) capital, and liability allocations (for partnerships), partner/shareholder outside/stock basis (partnerships or S Corps) , E&P calculations (C Corp), foreign tax credit computations, state franchise taxes, and probably a handful of other things. I assume they may accrue interest, as well, if not forgiven…

The likely-incorrect shortcut would be to just run it through as an other increase/decrease on the current year M2 but if the prior year impact is nil/minimal, it is probably the practical treatment.

Thank you for this! I thought about amending too but then it would need to be 2 prior year amendments.
M2 seems like the easiest option. If the forgiveness income was say $100k though, shouldn’t the shareholder techincially have been taxed on that amount? Would you record the income along with the M2 or just the loan?

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