California PPP loan exclusion from income

[glenn6770362]

The Turbotax partnership return for California does not conform to the California form 565 instructions for reporting income. The program erroneously asks "Was the loan forgiven between April 1, 2021 and June 30, 2021". And writes in its tax guidance:

"California law does not conform to this extension and does not allow an exclusion from gross income for PPP loans forgiven during the extended covered period beginning after March 31, 2021 until June 30, 2021."

The California form 565 instructions state:

"California law does not conform to this extension and does not allow an exclusion from gross income for PPP loans forgiven due to the extended covered period after March 31, 2021 to June 30, 2021".

The key words Turbotax ignored was "due to". Which means, according to the FTB faqs-for-paycheck-protection-program:

"California law does not conform to this extension and does not allow an exclusion from gross income for PPP loans made during the extended covered period after March 31, 2021 through June 30, 2021." not when the loan was forgiven.

The extended covered period allowed loans to be made during the period and has nothing to do with when the loan was forgiven.

Get a refund from Turbotax for the California return ($50).

[ARetiredCPA]

Same problem with instructions for CA form 100S - 

https://ttlc.intuit.com/community/business-taxes/discussion/ppp-loan-forgiveness-treatment-wrong-in-...

Hey Intuit?

[glenn6770362]

When I contacted intuit customer service their 2nd level technical support simply said "there are lots of bugs in the program". I told them this wasn't a bug - its a failure to understand plain English in the California Franchise Tax board documentation.

Oh well.

[PatriciaV]

Thank you for bringing this to our attention. We have forwarded your comments to tech support for investigation.

[ARetiredCPA]

Hi Patricia,

Is there any resolution yet?  After all, these returns are due in 4 days.

[glenn6770362]

I was notified of an update within the last hour and they changed the question from "was the loan forgiven" to "was the loan made" between April 1 and June 30, 2021.

Don't know yet if everything is fixed but at least they read the FTB instructions.

[glenn6770362]

Unfortunately they screwed up CalGrants that are federally taxable but not taxable for California. They take the other income from the the fed form and you must override both the California adjustment and the total on Schedule K line 1 columns (c) and (d). 

[Nomoretaxes]

I just updated and the California PPP is still not fixed.  I went into the Sch M  (during the Califonia State Return review when it shows you in the Form view) and I manually added a deduction adjustment to offset the Turbo Tax Addback adjustment.  This net the California Adjustment to zero.  For my deduction adjustment Description I put in the description:

PPP Loan Forgiveness

Non-Taxable per California AB 80 

Adjusting TurboTax Software Error

I hope that works and good luck

[ARetiredCPA]

I think if you went back to the the question about the forgiveness date that you answered "Yes" to, the question is now about the loan date, so if you answer "No" you shouldn't have to make the Schedule M adjustment.

[jzeng]

Things are changed.  Please read the latest from the California government:

https://www.ftb.ca.gov/about-ftb/newsroom/covid-19/faqs-for-paycheck-protection-program.html#:~:text....

Unfortunately, at this moment (Sept 5, 2022), the TurboTax Business is still not using the latest info.  This causes people to pay more taxes.  I hope Intuit can do its job better.  Of course, making people pay more taxes is always safe to favor the government :(  

The important change is:

The PPPEA extends the covered period of the PPP to June 30, 2021. California law conforms to this extension and allows an exclusion from gross income for PPP loans made during the extended covered period after March 31, 2021 through June 30, 2021.