how is non taxable EIDL advance grant report on 1120 S?

[turtle11220]

I have received EIDL advance grant for my S.Corp which is tax-exempt income. I don't know how to report this amount on balance sheet and 1120S.  Is Turbo tax going to be updated with this matter?

Can any tax professionals advise for small companies like me who can't simply afford to hire CPA as no income last year?

[ThomasM125]

If the income is not taxable, then you don't enter it on your business tax return form 1120-S as taxable income. You enter it on page 4 of form 1120-S as Other Tax Exempt Income. If your receipts for the year were less than $250,000 and your assets at the end of the year are less than $250,000, you do not have to submit a balance sheet. Just check the boxes on line 11 on form 1120-S page two.

If you need to submit a balance sheet, use schedule M-1 and M-2 on page five of form 1120-S to reconcile your tax income to your book income and balance sheet.

@turtle11220 @AmeliesUncle

[Edit 1/25/21 1:17PM PST]

[AmeliesUncle]

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@ThomasM125 wrote:

If the income is not taxable, then you don't enter it on your business tax return form 1120-S.

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That is not correct.  It needs to be entered as tax-exempt income so that Box 16 (Basis) is affected.

[DianeW777]

Yes, the grant is tax exempt and because it is not a loan and does not have to be repaid.  It would be an adjustment to the capital account and cash when received. This is how you would record it on the 1120S return.

For more information you can use this link: Instructions for Form 1120-S

• Excerpt: Column (d). Other Adjustments Account

  The other adjustments account is adjusted for tax-exempt income and federal taxes attributable to a C corporation tax year. After these adjustments are made, the account is reduced for any distributions made during the year. 

  • Do not enter the related expenses here because they are tax deductible and should be included with all normal business expenses.

[stepheney]

Hi as a follow up to your previous response. I have an EIDL grant that needs to be reported as excluded from taxable income income. All is good and balanced until I enter this amount in the worksheet. Entering it on Schedule M1 worksheet under 'other permanent income items - per books' creates an  auto fill to Form 1120S 16 'other tax exempt income smart worksheet' but no total in 16b. There is a caution note - 'if you are using schedule m1 items worksheet enter any other tax exempt income there not below' - this is what I am doing but its causing an out of balance error by the amount of the entry.  I've tried entering it numerous ways, including entering it first on 1120S  but cant figure out where the additional entry is needed to allow it to balance.

[stepheney]

please ignore - walked away from the screen for 15 minutes and answered my own question!