How to Report PPP Loan on 1120-S / Balance Sheet?

[NABA11]

PPP loan was given to pay for payroll, rent and utilities and not for shareholder distributions. You mentioned that RE got reduced/distribution of PPP loan money...

[MZVA1]

It was used for payroll.  But, since the loan was used for payroll, that left other income available to pay distributions, that would not have been possible without the PPP to pay the payroll.  

[John204]

We get basis for the PPP and EIDL advance amounts without it being taxed and we get to deduct the expenses which is great. The one thing I have not been able to find a clear answer on is whether on the M-2 this is AAA or OAA. It is defaulting to OAA but not necessarily the case. It might impact some of the people with large distributions. Have you come across any guidance for the AAA vs OAA classification?

[bjlinings]

Did you get your answer?  I am having the same problem.

[MZVA]

No.  I’m just going with what I stated before.  Never got confirmation.

[jprince1]

I do not submit a balance sheet since I am not required too. I just dont't know where to enter the PPP loan in the step by step on turbo tax? Will I have to enter it manually in the form? Thanks for the answer on the EIDL grant I can understand that.

[ReneeM7122]

There is no need to enter information regarding a PPP loan inTurboTax.  Under the CARES act, when the loan is forgiven, it is not included in income and therefore, it does not constitute a taxable event.

@jprince1

[Jdaw]

If loan has not been forgiven, then show as liability. If it has, then report as 'other income' on bottom of P&L and name the account non-taxable.  Recently Congress decided EIDL also is not taxable. BUT, check with your state. Both loans may be taxable on the state return.  On the federal tax return you can reconcile on schedule M-1 - Other permanent income items. and know that forever now your outside basis will be different.

[jprince1]

Thanks for that great answer ! Since I am a very small company I am not required to file a balance sheet so I have to now ? 

[JamesG1]

@jprince1

You report the forgiven PPP loan as non-taxable income.

States vary on their treatment.  

[Edited 03/22/2021 12:26 PM PST]

[jprince1]

Thanks for your response . My problem is that my loan is in process of being forgiven and I also have an EIDL advance of 1000.00 What do I do with these

[Jdaw]

for 2020 since it's not forgiven I would report on balance sheet as liability, both PPP and EIDL, since as of 12/31/20 you had not received forgiveness.

On the 2021 return report on Schedule M-1, Permanent items - Per books, $$ loan forgiveness. Per tax return $0.

[Jdaw]

JamesG1 - it is not interest - and should not be reported as such. You are correct it is reconciled on Schedule M-1, but I recommend writing in on the line Permanent Items:Other Permanent Income Items - PPP and/or EIDL loan forgiveness. HOWEVER., I also recommend waiting until 2021 to report the loan forgiveness just in case the loan is not 100% forgiven. And, also watch out for state - not all states are complying with IRS

[FNSCPA4444]

I have not applied for forgiveness, but I do qualify for forgiveness.

How do i report it on my 1120S

[FNSCPA4444]

The PPP Loan Forgiven Is Not Taxable Income And all the expenses Paid From it are deductible