Will Turbotax handle forgiven PPP loan?

[whighfill]

Turbotax Business 2020 does not ask any questions about possible PPP loans that were received.  Is Turbotax going to get an update that will address this, or are we on our own to figure out how to deal with forgiven PPP loans?  Seems like a glaring hole in TT.

[Critter-3]

PPP loans is a bookkeeping issue  NOT an income tax issue.  

In your books you will either :

1) count the loan proceeds as income and  take the expenses you paid with it as deductible expenses like normal.

OR

2) enter the loan as a loan on the books and once it is forgiven you must also reduce your expenses by the amount of the forgiven loan.  

Either method is correct as long as you are consistent in it's application ... option 1 is the easiest for most folks.

[sansho1]

Does this take into account the recent legislation, which seems to allow the "double-dip" benefit (i.e. the forgiven loan is NOT to be considered a portion of business gross income AND the expenses it paid are tax deductible)?  The current TT Business software doesn't seem to currently account for this, as it throws off my balance sheet calculation not to report the funds at all -- after all, I received the money.

[Rick19744]

No glaring hole in TT.

As noted before, TT is not an accounting / bookkeeping software.

Your balance sheet is prepared based on your books and records.

You will need to prepare / include an adjustment in the Schedule M-1 section of the software to handle the difference between book and tax.  No different than any other book/tax differences.

What you have here is income for book purposes NOT income for tax purposes. 

[Critter-3]

I have not heard of the situation you describe ... double dipping is normally not allowed.  Please post where you read this option. 

[Critter-3]

Well I see I may have old info ... but double dipping seems to be allowed after all ...  https://www.uschamber.com/co/run/finance/tax-implications-of-paycheck-protection-loans#:~:text=Does%....

In this case in your bookkeeping the loan is not income so you would negate it in your books  and still get to deduct the expenses it paid.  I wonder if anyone in congress has a single brain cell to share among all of them.

This forgiveness is NOT entered anywhere on a tax return at all ... it is only a bookkeeping entry. 

[sansho1]

To Rick

Thanks for your reply.  I will look for how to manually enter the M-1 adjustment, but I am not particularly savvy.  TT Business always asks me to reconcile my balance sheet, so whether it is book or tax it seems I have to get it right on the tax prep software in order to complete it.

(And this extremely common but heretofore unprecedented situation would seem to call for a guided process within the program, in my opinion.  I would echo the OP's hope that an update is forthcoming).

[Critter-3]

Clearly you have an increase (debit) in cash on the asset side and need to increase (credit) a liability account on the liability/shareholders' equity side (most likely notes payable in one year or more or other liabilities).

[sansho1]

OK thanks.

[Rick19744]

@sansho1 

You will report the PPP funds received as income for your books and records; as you noted, you did received the funds (cash) and it needs to go somewhere.

Originally you would have debited cash and credited Triple P loan.

When the Triple P loan is forgiven, you will debit the loan account (to zero this out) and then credit income.  You can call it "grant income" "Triple P income" "PPP income"; whichever language works for you.

This should balance out your balance sheet.

Then once this transfers to TT Business, then that is where you need to make the adjustment for the M-1.  As stated previously, this adjustment is income reported on the books not on the tax return.

[abowker]

I believe this answer is wrong.  The PPP loan is not counted as income.  I am also wondering how to show this on turbotax.  IT is not a "dumb question".  If we deduct the PPP loan from payroll, then payroll will not match 941's.  That seems like it's a set up for an audit.  Still searching for an answer.  Been searching for hours.

[whighfill]

So many of these responses sound like I am supposed to be a tax pro.  I am not a tax pro, I'm a tiny little business owner who can't afford a bookkeeper or a tax person, so I have to do all this on my own.  Just like millions of others in the US.  

As it turns out, it sounds like the legislation Congress passed right before Christmas changes everything.  The PPP loan is not income, all the expenses related to it are deductible.  Congress may have finally done something good and smart.

[abowker]

I was just corrected, we can deduct the expenses!  Yea.  Thank you for the update!

[tegrimfa]

Apologies if this is too simple a question.  If we received a PPP loan and it was forgiven, I understand it is not taxable.  We are a partnership so basically all of our income goes to partners.  So how do I record this in business taxes and then is it taxable for each partner.  We are actually talking about a small amount of money.  Thanks for your help.

[ThomasM125]

If your PPP loan was forgiven, then you don't report it as income on your partnership tax return. If you used the funds for qualifying expenses, they are deductible as they would be otherwise. So, there would be no additional entries on your partnership tax return, simply leave the PPP proceeds off the return. It is not reportable on the partner K-1 schedules, as it is not taxable to the partners.