PPP and EIDL cash advance

[jprince1]

Turbo tax does not ask me anything about my PPP and EIDL cash advance from 2020? My forgiveness is in process. Where do I enter it? Some people have said on schedule M-1 no clue how to get there! my business is very small and I am not required to submit a balance sheet. Can someone please help?

[ColeenD3]

For small businesses

Any money you receive from the loan forgiveness is not part of your gross income and therefore isn’t taxable. However, the payroll and other expenses that PPP loan forgiveness covers are also not deductible, even though they usually would be. The IRS says this is “to prevent a double tax benefit”.

Note: Employers that receive a PPP loan can’t also claim Employee Retention Credits.

Please see this LINK for more information.

[John204]

That was changed by congress where the expenses are now deductible even though the forgiveness is nontaxable. I put my PPP/EIDL advance amounts as tax exempt income on the M-1.  The only part I am still trying to figure out is whether the PPP/EIDL advance amounts that are nontaxable post to AAA or OAA for my S-corp. Doesn't impact us currently but may effect taxability of distributions in the future if the amount is not in AAA and we distribute. 

[MaryK4]

It will go on the Other Adjustment Account (OAA)  The OAA is adjusted for tax-exempt income (and related expenses) and federal taxes attributable to a C corporation tax year.  It is a negative adjustment to the capital account.

@John204

[John204]

I thought about the "and related expenses" part after I posted that one. Thank you for confirming. 

[NancyG3]

so how would you post this then?  the M1?  what kind of account would I post this in?  Make a new account ?  Help please  the explanation did not help me.

[tr1anglessk]

As a Schedule C taxpayer, you don't report an M-1 or a Balance Sheet, and you don't need to report your PPP forgiveness income anywhere on your Schedule C tax return. You are required to include a statement on your tax return though (new for 2021 tax filings). The statement should indicate:

1. The business name, address, and EIN/SSN;

2. A statement that the taxpayer is applying section 3.01(1), (2), or (3) of Rev. Proc. 2021-48, as applicable. This is in reference to whether your PPP loan has already been forgiven, has applied for forgiveness but hasn't received it yet, or did not fully meet the requirements for forgiveness.

3. The amount of tax-exempt income from forgiveness of the PPP loan that business is treating as received or accrued during the tax year; and

4. Whether forgiveness of the PPP loan has been granted as of the date the return is filed.