Will Turbotax handle forgiven PPP loan?

[glenn6770362]

This is not the issue I am concerned about. TurboTax California wants to put my forgiven PPP loan in taxable income because the loan was forgiven during the extension period. That's NOT what the California FTB says. The FTB says that loans made during the extension period, if they are forgiven, are taxable income.

[RobertB4444]

@glenn6770362  Please change the date that your loan was forgiven back to before the extension period.  Since this doesn't effect your return at all this should solve the issue.

[glenn6770362]

The last TT business California update changed the language in the question to conform to the law. Thanks anyway for your advice.

[Jasminsreichle12]

Hello there - 

I am am self employed in Ca, had a PPP loan in 2021 during the extension period March-June, and it was forgiven in full. Now, for Federal purposes, I understand I only have to click through the questions that allow me to produce form 4197 to report it. 

Now California does not conform, means my PPP loan is now taxable income. However, I do qualify for the 25% gross receipt rule. What does that mean for my entry in Turbo tax? Originally, I thought I had to use the PPP-deduction add back with the full loan amount. But that seems wrong because I AM allowed to do the deduction. I do seem to need to report the ppp loan as income. How does my TT input look to display this scenario? 

[PatriciaV]

If you qualify for the 25% gross receipts rule, enter an adjustment in California to report the PPP Loan Forgiveness income based on that rule. Most taxpayers report this as an adjustment to other business income.

[Jasminsreichle12]

Thanks ---

Is the below how you would recommend to do that? (sorry it's blurry, but you get which screen this is (other Adjustments and then the PPP portion)

[PatriciaV]

Yes, this looks like the best way to report the adjustment on your State return.

[confusedabouttaxes23]

@AliciaP1 

I got ppp first and second draw in 2021. I applied for and got them forgivness in 2022. Page 23 of 1040 instructions says "Rev. Proc. 2021-48, 2021-49 I.R.B. 835, permits taxpayers to treat tax-exempt income resulting from the forgiveness of a PPP Loan as received or accrued: (1) as, and to the extent that, eligible expenses are paid or incurred; (2) when you apply for forgiveness of the PPP Loan; or (3) when forgiveness of the PPP Loan is granted." Can I choose 1 my covered period year 2021 even though I did not apply and get forgiveness till 2022? If I can choose this for one of the draws I paid myself all instead of paying expenses. I am a sole prop no employees using sch c. Sba says paying yourself with ppp is payroll so is option one right for me?

[AliciaP1]

Yes, you want to deduct the expenses for 2021 on your 2021 tax return so you will choose option 1 - "as eligible expenses are paid or incurred".  

@confusedabouttaxes23

[confusedabouttaxes23]

@AliciaP1 

For one of the draws I paid my business expenses and myself. For the other one it was just easier to pay myself for entire covered period. I am sole prop with no employees so sba was allowing us to do. In this statement it says when eligible expenses were paid or incurred. I paid myself but sole prop owners don't put their salary on sch c as they cant pay themselves and deduct it from their profit. Does this mean I can take option 1 for both draws including the one I paid all to myself. It was an eligible expenses owner compensation according to the sba. But again sole prop owners can't pay themselves so no payroll for owner on sch c. Is irs eligible expenses means same paying myself with ppp also even though it is not put in sch c like sba definition

[AliciaP1]

Yes, the covered expenses are slightly different for Schedule C filers and your payment to yourself with PPP funds is considered Owner Compensation Replacement.  Since your "compensation" is Net Income from your business, this is why Net Income was your basis for your loan amounts.  So, a draw for yourself as a Schedule C filer without payroll counts as your owner compensation.

@confusedabouttaxes23

[confusedabouttaxes23]

So does sba payroll cost which for sole prop sch c filers with no employees means owners compensation mean the same thing for irs elegiable expenses were paid or incurred mean the same thing for option one? Sba payroll cost=owners compensation=irs elegiable costs were paid or incurred. For one of the draws I just paid myself so nothing gets put on sch c since that is not an irs expense so does that mean I can still use option one for one of my ppp draws i took 100% owners comp for?

@AliciaP1 

[AliciaP1]

Yes, they are the same.

@confusedabouttaxes23

[AFZAL KHAN]

How to get to LLP -K3 data for Phillips 66 partners?  It’s not in down load for 2021 

[Critter-3]

The K-3 form information is useless and you don't need it to file a personal tax return ... this is really for the partnership return.  https://www.irs.gov/pub/irs-pdf/f1065sk3.pdf