How is EIDL Advance reported on 1120S?

[bill334]

The EIDL Advance is a grant that does not have to be repaid.  On the 1120S, is it reported on Line 5, Other Income?  or does it go somewhere else?

[Critter-3]

As far as I know at this time ...   you will NOT report the grant on the return since it is NOT income  AND  the expenses paid with that forgiven loan / grant    are also not entered on the return ...   https://home.treasury.gov/news/press-releases/sm1187

[bill334]

The link you posted applies to PPP.  I am asking about the EIDL advance.  Any advice on that?

[Critter-3]

The EIDL   is a LOAN ...  NOT INCOME  so you do not report it as income.  The interest paid on the loan is a deductible  expense just like if you used a credit card or line of credit to pay expenses.

https://www.sba.gov/sites/default/files/2020-09/COVID%20EIDL%20FAQ%20rev%20092120-508.pdf

[Critter-3]

If your EIDL is indeed a grant and NOT a loan then it is treated just like the PPP or any other grant. 

[AmeliesUncle]

Yes, the EIDL grant (the amount that does not need to be repaid) is entered as income on the tax return.  "Other" income is an appropriate place to put it.

[susanmcturbo]

Is the EIDL advance considered to be taxable? If not, where do I enter that amount in TurboTax?

I did not receive the loan, but I did receive an EIDL advance, which is a grant that does not have to be repaid.

I used it for business expenses. 

[UCguy]

I have the same question as well. Some replies said the Grant should be put under "other income" since it taxable income but some said need not to report. I am so confused. Can the tax adviser from TurboTax give us a clear answer, please?

Thanks

[AmeliesUncle]

They changed the law a few weeks ago.  The new law says the forgiven amount from a EID loan is NOT taxable income, so it does NOT need to be reported as taxable income.  But in order for it to affect the Basis box on the K-1, you need to enter it as tax-exempt income [edited].

[bill334]

It still needs to be reported on the tax return, doesn't it?  Because it affects the company's assets and shareholder basis?

Would you put it on line 16b, Other tax-exempt income???

[AmeliesUncle]

It is NOT taxable income.  Yes, you need to enter it as tax-exempt income [edited].

If you file a Balance Sheet for a corporation or partnership, it would be on there.  However, corporations and partnerships are really NOT a do-it-yourself project, and you really need to be going to a tax professional.

[ThomasM125]

Economic injury disaster loan (EIDL) advances would normally be taxable. However, since they are associated with the payroll protection program (PPP) loans which are clearly not taxable, it seems likely that they are not taxable as well. However, it is hard to find direct substantiation of this in IRS regulations.

Assuming they are not taxable, you would not enter the EIDL advance as income on your tax return. There are typically differences between income reported on your company income statement and the income reported on your company tax return. So, your balance sheet as listed on your tax return will not necessarily tie into your income listed on the return. You reconcile the two on schedule M-1 on your form 1120 or 1120-S, corporate income tax return.

Assuming you used the loan or advance proceeds for qualifying expenses, the expenses would be deductible.

Coronavirus Tax Relief and Economic Impact Payments | Internal Revenue Service (irs.gov)

Eligible Paycheck Protection Program expenses now deductible | Internal Revenue Service (irs.gov)

[UCguy]

Thanks for your advice!

Your answer clear lots of tax filer's cloud in their heard.

It is helpful!

[bill334]

It seems to me the EIDL Advance (which is not a loan; does not need to be repaid)  affects shareholder basis and so should be reported on line 16b (other tax-exempt income).

I have gone completely through the TurboTax questionnaire and it never gave me an opportunity to enter this information.

Can you explain how, exactly, i enter this in TurboTax?

[ThomasM125 · Accepted solution]

You need to go into the Forms mode to make the entry. You will see an icon for it on the top right of your menu bar in TurboTax. When you see the list of forms on the left side of your menu bar, choose Form 1120S p3-5 and then you will find line 16(b) on page 4.

@bill334