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Level 1
posted Mar 14, 2021 7:19:42 PM

How to report a PPP loan that was forgiven in 2020

I have an S-Corp business.  We were given a PPP loan in 2020 and it was forgiven in 2020.  How do I report that on the tax form 1120S?  On my books, it is currently sitting in loans payable - I do not know how to handle the fact that it was forgiven on my books.  It would be nice if Turbo Tax addressed that specifically.  Can anyone lead me in the right direction.  I have searched through IRS.gov site and the SBA site and cannot find anything that explains how to record this situation and report it on taxes.  Thank you in advance for your help!

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1 Replies
Expert Alumni
Mar 15, 2021 8:32:19 AM

This is a bookkeeping issue and not a tax issue.

 

The forgiven PPP Loan amount is an increase to the holder’s tax basis for purposes of calculating tax basis under Section 705 and Section 1376, (i.e., for partners’ interests in partnerships and shareholders’ stock of S Corporations, respectively),

 

This eliminates the potential that the forgiven PPP Loan amount would indirectly be taxed as capital gain upon a future disposition of the holder’s partnership interest or S corporation stock.