Will Turbotax handle forgiven PPP loan?

[OTBTATL]

Thanks - you are right as I have indicated n previous posts on the matter. The questions remains where on form 1120 or 1120S does one include this and it has to because these forms require the reconciliation between book (accounting) income and tax income.  PPP forgiveness is absolutely book (accounting) income i.e. you can't just make a 1 sided journal entry to make a liability disappear. However for tax there is nothing. One will have to show the reconciliation on schedule M-1 of these 2 forms. 

[ThomasM125]

@OTBTATL If you think the PPP loan will be forgiven, then you won't report it as taxable income in TurboTax. You would report it on line 16(a) of Schedule K as Other Tax-Exempt Income if you are filing a form 1120-S. It would go on line 18(b) on a Schedule K for form 1065. It would appear on your financial statement as either loan payable or other income, so there may be a reconciliation issue if you report your balance sheet on your tax return. This may be aided by the entries in Schedule M-1 and M-2 in TurboTax and on your corporate income tax return.

[OTBTATL]

Thanks - I didn't look further but agree with your response on where this "should" flow on K-1 on either of 1120 or 1120S. If the loan is forgiven it'll show up on the books as other income but not taxable income. So it'll have to flow in M-1. I haven't seen this on Turbo Tax business software when I last looked. There have been 2 updates since then so maybe its addressed? Time will tell.    

[justagal1]

I am having the same problem. I am a S-Corp and file an 1120s. I received a PPP loan and it was forgiven. Although it is not included in my net income it does affect my balance sheet. There needs to be some sort of adjustment on 1120 Schedule K so that the forgiven loan amount does not pass through to me as a shareholder. I tried calling TT and the woman I spoke too knew even less about business taxes than I do. And that's not alot!

HELP

[suenjgdinc]

I am not a tax person by any means, however, I did the tax return for our S Corp.  I also couldn't figure out how to make it work correctly and still stay in balance.  I did include the PPP amount as other income.  When the loan was received, I debited cash, credited a loan liability.  When it was forgiven, I debited liability and credited other income.  On the schedule K, line 16b, I put the loan amount as a code B which is other tax-exempt income.  So the amount rolls out in line 1 as income but is deducted on line 16b.  Hope that helps!  I don't know right or wrong on that but at least I can stay in balance, get our taxes filed and the owners won't have to pay tax on the PPP amount.  Should the IRS ever pay us a visit, I will ask for forgiveness as I acted in good faith.  TT help told me that they don't support business tax, only personal tax questions/issues.

[ReneeM7122]

You are correct.  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. 

@suenjgdinc

[DapperDave64]

Hope this helps:

As of Feb 23, 2021 - The California Legislature is still negotiating a PPP/EIDL conformity bill that would allow California businesses to deduct expenses paid with these loans/grants. It is hoped that this bill will be passed by the end of this week.

https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=202120220AB281

https://www.caltax.com/news/category/hot-news-and-notes

[JJL26]

I understand that we are not supposed to include this as income as it is deemed "not taxable", however if we do not count it as income, then are we not required to reduce the expenses that the PPP Loan was to cover?  Otherwise we would be double dipping.  And if we are supposed to offset, then how do we handle that on something like payroll as our numbers will then not match our 941 reports?

[suenjgdinc]

December 27th, it was signed into law that PPP is not taxable income and you can deduct the expense that it was used for. It is "double dipping" and it's ok.  That's at the Federal level.  If you are in a state that has state income tax, there may be a tax issue for you.  I'm in Texas, we do not have state income tax.  The CPA that I spoke with said we do need to include it as "other income" once it has been forgiven.  On schedule K, line 16b, non taxable income, you put the forgiven amount as a code B.  It will roll out on K1's split out per shareholder.  The balance sheet, income statement, etc on 1120-S all balances out to your books.  

[bjlinings]

I think where some of us are having a problem is when it moves over as other income.  On my income statement, I show it as other income.  It then carries down to net income.  With the double dip, how are we offsetting this?  I'm sure its something simple and right in front of my face, but I'm just not getting it.

[DapperDave64]

Suggestion for 1120s:

Schedule B, Line 12....... answer Yes and enter the forgiven PPP/EIDL amount

Schedule K, Line 16b..... enter the forgiven PPP/EIDL amount

Schedule M1, Line 5a.... enter the forgiven PPP/EIDL amount  (ignore the word "interest")

Schedule M2, Col (a) AAA, Line 3….. enter the forgiven PPP/EIDL

[WendyN2]

@bjlinings I actually did a Webinar yesterday that was predominately about just this. Evidently, it IS "double-dipping" and that is ok in this unique situation. I did some additional reading and the IRS does not speak to this (because, of course, I don't think we're ever going to hear an IRS agent state that "double-dipping" is ok), but from what experts are saying is that due to all of the intricacies of this type of "transaction" if you think of it that way, it is a temporary "loophole" that surely will get closed up sooner rather than later. This past year has brought so many grey areas. I hope this eases your mind a bit. The instructor for the Webinar was a man named Jason Dinesen, EA and I took it through MyCPE (my-cpe.com). Just in case you wanted to look him up as an additional comfort. 

[acpacp]

Can TurboTax produce a definitive guide on how to handle forgiven PPP loans and EIDL grants in TurboTax Business software, or update the software so that it is obvious how to do so? S-Corporation returns are due in two weeks. I bought TurboTax Business solely to figure this out, and this seems like a common issue impacting millions of business owners. This alone makes 2020 returns substantially different from returns in years past. It would be greatly appreciated if an employee would respond with a link to a definitive response, or the software could be quickly updated so that users are prompted about EIDL and PPP.

[donnabean40]

where on the balance sheet do I enter a forgiven PPP loan?

[Critter-3]

As already stated in this thread : 

Suggestion for 1120s:

Schedule B, Line 12....... answer Yes and enter the forgiven PPP/EIDL amount

Schedule K, Line 16b..... enter the forgiven PPP/EIDL amount

Schedule M1, Line 5a.... enter the forgiven PPP/EIDL amount  (ignore the word "interest")

Schedule M2, Col (a) AAA, Line 3….. enter the forgiven PPP/EIDL