PPP and EIDL

[jprince1]

1120s PPP recording

Do you have any Idea how to report a payroll protection  program loan oan that is in process of being forgiven from 2020, also I took a economic injury disaster loan advance advance? Many conflicting answer's here. Some people say just count as usual income and file like always, some say don't report but that throws the balance sheet way off. My business is small so I am not required to file a balance sheet ! please help! I just would like to know how to enter it in my Turbo tax business software so I could get my taxes done

Thanks

Jeff Prince

[JamesG1 · Accepted solution]

You report the forgiven PPP loan and EIDL advance/grant as non-taxable income.  In TurboTax Business for an 1120S member:  

• Across the top of the screen, click on Federal Taxes. 
• Click on Balance Sheet.
• Enter Total Year-end assets.  Click Continue.
• Click No, I want to complete my balance sheet.  Click Continue.
• Under Your reconciliations and balance sheet, click on Edit to the right of Income reconciliation.
• Click No, I’ll enter a different book income.  Click Continue.
• If non-taxable PPP loan is $10,000, taxable income for the year is $59,000, so book income must now be $69,000.  Click Continue.
• At Your reconciliations and balance sheet, make sure all three schedules are in balance.
• Click on Forms mode. 
• Click on M-1 Worksheet.  The forgiven PPP loan will be listed under Permanent Items (tax-exempt income).
• Click on a K-1.  The forgiven PPP loan will be listed under line 16 code B.

See also Instructions for IRS Form 1120S page 35.  States vary on their treatment.

Some are choosing not to report these items as tax exempt income at this time and may elect to amend at a later time.

Regardless of the IRS requirements, most tax software will require you to 'balance' the balance sheet, income statement, M1 and M2 before the tax return can be e-filed.  Some have chosen not to 'balance' and mail the forms to the IRS.

This article states:

The Consolidated Appropriations Act also provides that taxable income does not include EIDL grants or certain loan repayment assistance.

[jprince1 · Accepted solution]

Thanks for your response it was the best one I received so far . I think I am going to take the easy way out and just claim the PPP  loan and the EIDL grant as taxable income you said many people are doing that correct? Should I just include it in my receipts total or other income

[JamesG1]

Just report each separately under Enter your own categories as grant income.

In most instances, grant funds are counted as taxable income on your federal tax return. This means that you will be required to pay taxes on these funds.

[jprince1]

So it looks like it may just be easier just to report these funds as taxable income. So is it ok just to treat all these funds like regular income and file your return as I normally do without filing  balance sheet?

[JamesG1]

Yes, you may elect to treat the forgiven PPP and EIDL advance/grant as taxable income.

[jprince1]

My PPP loan is  in process of being forgiven.  I was notified by my bank that SBA has paused all forgiveness applications for further updates and guidance. So will I still be ok to put it under the taxable income? I just want to do it this way just easier for me.

[jprince1]

ok last question if I decide to report my PPP and EIDL advancxe as no taxable income I enter it on line 16B of the K-! as tax exempt income and I should be good correct? I am not required to file a balance sheet

[JamesG1 · Accepted solution]

You are correct.  You may elect to treat the forgiven PPP and EIDL advance/grant as taxable income.

Or, you may report the forgiven PPP and EIDL advance/grant on line 16(B) of the 1120S K-1.

[jprince1]

My loan is in process of forgiveness. SBA has paused forgiveness  applications until further guidance comes out. I would have taken loan and the EIDL as taxable income but I would take a 900.00 deduction on my return. If I would take it as taxable income I would have a 900.00 profit if I take it as non taxable I have a 6000.00 loss. Finishing up I am good to go If I enter both as non taxable on my schedule K line 16 b even though the loan in in process of forgiveness?

[JamesG1]

How comfortable do you feel about your compliance with the PPP loan requirements?  That is a personal decision.

In my case, I and a client were comfortable reporting PPP loan as nontaxable income in February.  I am told that the bank has finally approved our application (submitted last July) but I have yet to see the paperwork.

The US Chamber of Commerce states:

A PPP loan can be forgiven as long as at least 60% has been spent on employee payroll costs. The other 40% of funds are allowed to be used for expenses, including mortgage interest or rent obligations; utility costs; operations costs such as business and accounting software; uninsured property damage from civil unrest; supplier costs on essential goods; and worker protection expenditures such as personal protective equipment (PPE).

Forgiveness is based on employers continuing to pay employees at normal levels for a period between eight and 24 weeks following the loan’s origination. The Treasury Department released multiple PPP Loan Forgiveness Applications, which must be filled out by businesses seeking forgiveness and then submitted to the private lender from which they obtained the loan. All companies that have accepted a PPP loan or are considering a PPP loan should closely examine the application to make sure they are compliant.

[jprince1]

I have been informed that my PPP loan may not be a 100% forgiven. I already filed and the IRS accepted my 1120s .  I entered the loan amount as non taxable income on line 16B. I am re submitting my forgiveness application. If I have to pay some of this back how do enter it in my books and on my taxes for next year?

[Jasminsreichle12]

Hello —

do you know how to fulfill the reporting requirements for the EIDL grant ($1000) on the tax return for a self employed individual? On Federal and California level? And how to enter it all as non-taxable income in turbo tax?

got my grant in 2020. did not report in on 2020 tax returns bc I did not see any prompts to do so. 

after spending quite some thought on the 2021 return for this, it appears that the federal level is not asking for this input (only PPP) and on CA level, the inputs given do not equate to non-taxable adjustment. This along with othe expert answers lead me to believe that I do not need to report it then. However, the instructions of form 4197 say they want EIDL reported for reporting purposes, which then would Allow me to record that it was taken, but not in which yr and for which amount. I don’t know if this so confusing because in fact I have nothing to record for in 2021, but would like to do so much rather than amend 2020. 

can you help?

[DaveF1006]

Yes, here is an explanation from the on-demand tax guidance in turbo Tax regarding form 4197. 

1. Reporting Requirements - For taxable years beginning on or after January 1, 2021, taxpayers who benefited from the exclusion from gross income for the PPP loans forgiveness, other loan forgiveness, or the EIDL advance grant and related eligible expense deductions under the federal CARES Act, Paycheck Protection Program and Health Care Enhancement Act, Paycheck Protection Program Flexibility Act of 2020, or the CAA, 2021, should file form FTB 4197, Information on Tax Expenditure Items, as part of Franchise Tax Board's (FTB) annual reporting requirement.

Note: For taxpayers that benefited only from the PPP, other loan forgiveness, or EIDL program, complete only Part I, column (a); do not complete the rest of the form.

If you personally benefitted from this in the matter prescribed above, then you need to include the 4197 in your California State return.  Here is the direct method of accessing that form in your program.

• If using the desktop software program, go to the forms mode in your Turbo Tax program
• Go to California Individual in the forms menu section in the the left pane of your program
• Select open form at the top
• Select the plus sign for California
• Scroll down to form 4197, select it to add.

@Jasminsreichle12