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Frankly, I would let the employer dictate this one; if they go ahead to report it as wages later should it be forgiven, then again, issue at hand solved, but if not, a complete no-go area. If they do not declare it as income it may create a lot of problems to the client, they may be sacked should they declare it themselves. It is usually safer to stand still and let the employer take the blame or not, whichever way it is.

This is not true. I have retired clients nearly every year that ask how much they can draw from their retirement and avoid paying tax. If all they have is interest, dividends and SS; it is easy to forcast the safe amount they can withdraw. It can be any amount if you do the expected calculations correctly. I have had clients withdraw the max that they can, whether they need it or not. Going forward, the only tax they will pay will be on the interest if they don't spend it. Some may even have CG or Capital Loss Carryforwards. There is no one statement that is true for everyone. I never advise rolling a conventional into a Roth. Start a new Roth if you want but NEVER roll. IMO

Another important factor is the amount of the "loan". If it is more than say 35% of the employee's average paycheck, if the employee walks before the 3-year period, the employer may not be able to recapture via payroll and would be wanting to make it wages - at least for "punishment" purposes. (A daily issue on payroll chat groups, how to recoup advances, sign on, moving, etc.) If the OP is from the perspective of a preparer handling a question from a client (the employee), I would not (as preparer) step in the steaming pile. Let the employer handle it, correctly or incorrectly, and go from there. The employee reporting it as wages, when the employer has not, could result in the end of the employment. If the employee wants to work for someone who may be shady, so be it. The main issue is it is taxable period. Trying to make it not is a problem, as it trying to tax shift (if the forgiveness is a wink and nod deal instead of documented).

WASHINGTON — The Internal Revenue Service today announced that preparer tax identification number (PTIN) renewals for 2025 are now being processed. The nation’s more than 810,000 tax return preparers must renew their PTIN for the coming year. All current PTINs will expire on Dec. 31, 2024. https://www.irs.gov/newsroom/irs-reminds-tax-professionals-to-renew-ptins-for-2025-tax-season

Done

Yeah, I would’ve ignored it too. People can be so entitled sometimes.

Complicated. For accounting/tax, at date of loan becoming junk (uncollectable) may be proper. Your post stating it was an agreed time frame means the amount should likely cause recalculation of wages for RROP (Regular Rate of Pay) purposes to make sure OT and PTO were paid using the correct (RROP) rate, and any difference made up (as well as adding the forgiven amount as current wages). Same as if it were a retention/hire bonus paid 3 years later.