PPP Loan proceeds as it pertains to balance sheet

[information1]

Hello, I am at the balance sheet section of my return (S Corporation) and, as expected my balance is off by exactly the amount of my PPP loan (which has been forgiven).  Where do I enter this non taxed amount in order to balance my balance sheet?

[M-MTax]

@Critter-3 knows about this.

[Critter-3 · Accepted solution]

Where do PPP loans go on S Corp tax return?

PPP loan forgiveness is included as book income

1. On the Schedule M-1 as income on books not on return.
2. For an S Corporation, the amount is treated as other exempt income.
3. On Schedule K, line 16b.
4. On Schedule K-1, Box 16B.
5. On the Shareholder's Basis Worksheet, Page 1, Line 7.

[M-MTax]

Great!

[mini 11]

I think forgiven PPP loan should be entered on Schedule M-2 line 3 (d) other adjustments account as well.

I am not sure about  "5. On the Shareholder's Basis Worksheet, Page 1, Line 7." this is for loss item/non deductible expenses. If you enter PPP loan amount on line 7, your stock basis will be decreased by PPP loan amount. 

I understood Stock basis should be increased by forgiven PPP loan amount since it 's tax exempt income. 

I am confused now about "5. On the Shareholder's Basis Worksheet, Page 1, Line 7."

Can you clarify further?

Thank you very much!

[JillS56]

Yes, you are correct that the PPP loan forgiveness is to be reported on the M-2 line 3 column d.      Here are the steps for reporting the PPP loan forgiveness on M-2 of your 1120-S:

1.  Report on Line 3, Col (d) the amount of the PPP loan forgiveness
2. Report on Line 5, Col (d) the amount of expenses paid with the PPP proceeds forgiven,  

The amount of expenses and the amount of the PPP loan forgiven should offset each other.       

You are also correct that the PPP loan forgiveness is supposed to increase your basis not decrease.  PPP Loan Forgiveness should not be reported on the Shareholder's Basis Worksheet page 1, line 7.   Line 7 is asking for a non-deductible expense.    The PPP loan is not an expense.  The amount of the PPP loan forgiveness should be reported on Schedule K-1 Line 16 Code B. 

Here is an article PPP Loan Forgiveness

[DD-DB111]

This is so confusing to a non Accountant, who just wants to file their Business Taxes.  Return is due March 15th, and I have been watching these conversations about PPP and how it should appear and what overrides can be done.  The same as other users, when I override, I get errors, etc.  I have tried answering NO to PPP loan question and all shows up on M1 and M2 as expected.  I have tried answering YES to PPP Loan, This results in a loss for the year, and the PPP loan, but nothing appears in M2 Line 5 Column D.  Depending which way I do this, changes the M1, M2 & K1, plus sometimes the Balance Sheet will not reconcile.  IS TURBOTAX GOING TO UPDATE THE PROGRAM TO HANDLE THIS CORRECTLY AND WHEN CAN WE EXPECT THAT?