How is EIDL Advance reported on 1120S?

[susanmcturbo]

What form is used for a LLC. 1120S is for Corporations.

Thanks, Susan

[DawnC]

A Limited Liability Company (LLC) is a business structure allowed by state statute. Each state may use different regulations, you should check with your state if you are interested in starting a Limited Liability Company.  

Depending on elections made by the LLC and the number of members, the IRS will treat an LLC as either a corporation, partnership, or as part of the LLC’s owner’s tax return (a “disregarded entity”).  Single-member LLCs file Schedule C, which is part of their personal tax return (Form 1040).  

Specifically, a domestic LLC with at least two members is classified as a partnership (files Form 1065) for federal income tax purposes unless it files Form 8832 and affirmatively elects to be treated as a corporation (files Form 1120 or 1120-S).

For income tax purposes, an LLC with only one member is treated as an entity disregarded as separate from its owner, unless it files Form 8832 and elects to be treated as a corporation (files Form 1120 or 1120-S).  However, for purposes of employment tax and certain excise taxes, an LLC with only one member is still considered a separate entity.    @susanmcturbo

[herbcraftorders]

so where does a LLC 2 member partnership, not regarded as a corporation enter the EIDL grant?  What form and line please?

[SamS1]

From the recent stimulus bill passed 12/27/2020, EIDL grants are not taxable.  So if your total receipts are less than $250K and your assets are less than $1 million, you would not need to report it anywhere on your form 1065.

The pandemic has affected your taxes in many ways. Including reporting in TurboTax the amount of stimulus money you received. Click Here for more information on how the Pandemic affected your 2020  taxes.

[herbcraftorders]

ok, now I am getting it.  I don't have to enter in anywhere on the 1065 because my LLC meets those requirements.  But I do need to put in on my jointly filed 1040-  it looks like it belongs on schedule k-1  for both parnters, line 18 (tax exempt income and non-taxable expenses), Code C (other exempt income)- right?  Since the LLC is a pass thru entity, that will keep it from appearing in my taxable income.

[ThomasM125]

If you enter it on your form 1065, schedule K, line 18(b), it will appear on your K-1 schedule in line 18. You will input this when you enter your  K-1 form in TurboTax for your personal tax return, but it won't show on your tax return because the income is not taxable.

[UCguy]

As mentioned in your answer, EIDL Grant is not taxable and need not to report on 1120S or 1120. However, when come to CA 100, there is a line in TurboTax asking to enter the Grant received. It seems in the State level, it is regarded as an income and thus taxable. My question is how can I handle this situation.

Hope someone would have an answer for me.

Thanks

[Peter312]

There still seems to be a problem with the 1120S software.  If you had an income of, say, $100,000 and had deductions of, say, $60,000 then your taxable income on Schedule K would be $40,000.  If you received a tax free EIDL grant of, say, $2,000 then your total income would be $102,000 but your taxable income should remain $60,000.  Unfortunately what I see is that even if you enter the $2,000 EIDL grant as advised in this discussion thread on Schedule K line 16(b), the taxable income on Schedule K (and the K-1s) remains $62,000 when it should be $60,000.

It sure seems to me that if that if Schedule K line 1) is $62,000 and line 16(b) is $2,000, then line 18) should be $60,000

As a result, no matter how many ways I try to enter the EIDL, either the Balance Sheet or the M-2 is out of balance...

[VT13]

Peter312, did you get an expert advise on your question? I am doing CA state part and it provided balance problems as you described. I was having problems with the PPP entry, too. CA State form 100S counts PPP as an income. However, I was able to fix the balance sheet by entering the offset in M1 Reconciliation of Income (loss) form, under 4 (b) Other. That fixed the balance sheet. Perhaps we can do the same with EIDL.

[Peter312]

I'm filing the 1120S.  I don't have a line 4(b) on the M-1.  I do have a line 5 where the tax exempt income seems to go.  But no matter what I do I can't get everything to balance.  What a mess...

I'm not in California so don't know anything about your issues.  🙂

[nflink1]

So, after reading all comments, can I assume the following for PPP funds and EIDL "loan" as it relates to tax form 1120-S?

1-  PPP funds received (all used) should be listed on line 16b (other non-taxable income).

2-  EIDL "loan" (not advance) should also be listed on line 16b (other non-taxable income).

3-  A private (non-shareholder) loan, should also be listed here (?)

4-  None of the above have to be listed / identified separately on line 16b?

THANKS!

[Peter312]

After struggling with how to get the tax free EIDL grant money onto the 1120S I finally found a way to make it work within TT. I'm not an accountant but my accountant has signed off on this return and the way I did it.

Line 1) Gross Receipts or Sales does NOT include the EIDL grant. That gives you a correct taxable line 21) Ordinary business income (loss). And that correct taxable number flows through to the Schedule K and on to the Schedule K-1(s).

Then go to the Forms method of data entry instead of the Step by Step method. Go to Form 1120S, p3-5 and enter the EIDL grant money on Schedule K, line 16b) directly or via the M-1 worksheet as 'suggested' by TT right on the form above line 16b). Either way seems to be fine. That flows nicely to the M-1 which now has line 1) correct as the Net income (loss) per books and the correct taxable income on line 8).

For one of the returns I'm doing TT then placed the EIDL amount on the Schedule L Balance Sheet, line 25) Adjustments to shareholders' equity which messes up the Balance Sheet. I Overrode that line 25) entry and deleted it and then everything looked good and TT said there were no errors.  This only happened one one company's return.

Lastly TT put the EIDL amount under Schedule M-2 column d). Adding all the columns on line 8 gives the correct Retained Earnings amount that transfers to the Schedule L, line 24.

Anyway, that's what worked for me and I'll use it for the other company returns I'm doing. Once again, I'm not an accountant so take all this as a suggestion only.

[ReneeM7122]

It depends.

For the state of California, a forgiven PPP loan is treated as income while the IRS doesn't handle it that way.  If you aren't from CA, then you do not have to make an entry on TurboTax since the forgiven loan is not a taxable event.  If you are in California, wait before you file your taxes because they are talking about conforming with the Federal government.  See this link for the legislature.

The PPP loan forgiveness is a bookkeeping issue and does not affect your taxes.  You do not have to pay tax on the PPP amounts. Under the CARES Act, the forgiven loan amount won't be included in taxable income. 

The Paycheck Protection Program (PPP) is part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which consisted of government-backed loans to help small businesses and other eligible applicants continue covering payroll costs and certain operating expenses during the coronavirus (COVID-19) pandemic. These loans were available to:

• Small businesses with less than 500 employees
• Sole proprietorships
• Independent contractors
• Eligible self-employed individuals

Under certain criteria, and if you use the funds as directed by the SBA, the loan may be completely or partially forgiven. Go here to learn about PPP loan forgiveness.

Regarding the EIDL, it's an advance loan.  You don't record loans as taxable income.

@nflink1

[Peter312]

Whether it's a tax free completely forgiven PPP loan or a tax free EIDL grant, at the Federal level it has to be entered into TurboTax to get the Balance Sheet to be correct.  As a non-taxable event it doesn't affect the income side of things but it does affect the Balance Sheet.  That's why an entry on Schedule K, line 16 b) is needed.  

[nflink1]

Thank you from Nflink1 in NJ !!

But re: form 1120-s ..............

My concern is that my business P&L statement shows a net ordinary LOSS of -$46,000, largely because of Payroll Expenses ($60,000) which were funded by PPP.  Yet PPP loan ($26,000 which will be forgiven) and EIDL "LOAN" ($30,000 which will be repaid) are listed in "non-taxable income".  Does it look strange showing a LOSS when indeed those loans/grants would have covered the LOSS?  My bottom line Net Income on P&L statement is $12,000.  If all this is correct, then -$46,000 will show up on the K-1, right?