Forgiven PPP loan is getting added to income on my NJ-K-1 (New Jersey). How to correct this?

[kvkeee]

Hi

I have my PPP loan forgiven for my S-Corp in 2021 and when I reported it in TurboTax Business, the Schedule K1 (1120-S)  show that forgiven amount in Box 16 Code B (Other tax-exempt income). However, on my NJ-K-1, this amount is included in the S-Corp income. This is inflating my numbers on my personal state returns.

Per my readings, the forgiven PPP loan amount is not taxable at both Federal and State (NJ) returns. See the NJ website link below.

https://www.state.nj.us/treasury/taxation/ppploan.shtml#:~:text=For%20Gross%20Income%20Tax%20purpose...).

How do I correct this? I am not sure if this needs to be corrected in Turbo Tax Business or Turbo Tax personal.

@PatriciaV Can I override the numbers on my state return (specifically on NJ-K-1) instead of using the numbers transferred from Federal? 

Thanks in advance.

[Lois957]

Kvkee,

I used Turbo Tax for Business to file 1120S and NJ CBT-100S and did not catch that Intuit included the PPP Loan Forgiveness on the NJK-1 until I reviewed my personal return for filing today.  Now I need to amend the NJ Corporate return to get a corrected NJ K-1 and do not see a way to do this in the software.  Hope someone can give us an answer as to how to amend the corp return to communicate to NJ taxation the correct amount.  If not, then they will automatically "correct"  the amount due to NJ and we will be in a bureaucratic nightmare to get it corrected.   

[kvkeee]

May be it is the limitation in TT, that it can't simply exclude the forgiven PPP loan amount while transferring the numbers from Federal to NJ. 

I see this in NJ "CBT-100S -> Page 9 -> Schedule K -> Part II -> Line l" that says "Other Tax-exempt income", but that amount is added to the total income (same page Part III -> Line 8. New Jersey allocated income).

What I am planning to do is, in "CBT-100S -> Page 10 -> Part IV - A (Analysis of NJ Accumulated Adjustments Account) -> Line 2. Net Pro rata share of S Corporation income", override the number to exclude the PPP forgiven amount. This is the only hack I can think of as of now.

Tagging some experts from Turbo Tax @DawnC @ThomasM125 @DianeW777 @DianeW. Hope some one is familiar with NJ CBT100S returns.

@Lois957 Sorry to hear your troubles. Unfortunately there is no product support from Intuit / TT for their business software. Good luck with amending your NJ return, and request you to post your updates here, so it will be useful for everyone in the community.

[Lois957]

@kvkeee  This is an error in the software and yet they have no support despite that we paid for the state program separately.    I fixed my personal because I am using HR Block software for personal filing and entered what the NJ K-1ws supposed to be.  Error, if not caught would have resulted in $1250 overpayment to NJ.  Problem is, if Intuit doesn't fix the software error so I can amend through an efile, my personal return will not be accepted as it was filed.  Not a chance that I can mail in a paper amended return and have it processed before they process my personal e-file return and consequently will be caught in NJ division of taxation hellhole.  Not sure which is worse, Intuit or NJ!  Isn't it incredible that we pay for the privilege to figure out our own hacks to get Intuit software to give the correct tax due??  There should be an easy way to report software glitches and actually have someone get back to you with resolution.  But I guess that is called customer service.

[kvkeee]

@Lois957  I followed the instructions given in this forum (See the link below) to correct my Schedule K in NJ CBT-100S.

https://proconnect.intuit.com/community/proseries-tax-discussions/discussion/ppp-loan-forgiveness-on...

I kind of skeptical about removing the amount entirely as I was thinking in my earlier post, because the amount is shown in Federal (1120S) and if it is not shown in the NJ CBT-100s that may raise doubts.

The above article suggests how to report it and make adjustments on CBT-100s.

[PatriciaV]

@kvkee @Lois957

The correct handling is to enter the amount of the PPP Loan Forgiveness as an adjustment on the New Jersey return. As stated in the ProConnect link, this will result in a deduction on Other Subtractions, line 6F, and will remove the income.

TurboTax (and all tax software companies) have had a real challenge keeping up with all of the tax changes enacted during COVID, and what you are reporting is a known issue that we are working on. There are a lot of moving parts to all of this, and programming it all is not as simple as it seems, especially since there were quite a number of other changes which have also created programming challenges to report everything.

Our customers deserve a program that delivers everything, and we take all feedback seriously.  I can say that these programming experiences have been escalated to be improved, and we do appreciate feedback from our customers so that we can get it right, or at least better.  In the meantime, if you were able to come up with a way to adjust your return correctly, we are thankful that a solution was possible.  Thank you for your patience in the meantime while we strive to improve.

[kvkeee]

@PatriciaV really appreciate your confirmation on what I did was correct.

I totally understand how difficult it is to make changes to the software to transmit the numbers from Federal to State, it's not as simple as it seems. But isn't it what we are paying for? If Intuit can't figure out how to incorporate the changes in time, how do I feel like paying additional $55 for the state?

As a paying customer, I expect proper guidance in such cases, at the least, if the software is not doing what it is supposed to do. I am being left in the dark without knowing what to do and no one to speak, researching on internet and spending hours and hours, wasting time and energy and still not confident if what I did was correct.

If I have to do all this by myself, why do I have to pay the additional fees?

[binitapatel]

I am having the similar issues so what i am planning to do is add PPP loan forgiven on schedule K. Part II, Other subtraction and then subtract PPP loan again here and then adjust in Part IV as you mention. and make some changes manually now.