Will Turbotax handle forgiven PPP loan?

[DawnC]

Since the loan is forgiven, then you won't report it as taxable income in TurboTax.    Use Schedule M-1 or M-2 in TurboTax to reconcile your books to your corporate income tax return.   It is book income, not taxable income, so the adjustment will reconcile the difference in reporting.   For Federal purposes, the expenses incurred using the PPP loan funds are deductible expenses on your business return.   @donnabean40

[bbhesse]

The part I was struggling with is how to make the adjustments on the M worksheet but I figured it out, has to be done through the step by step and cannot be done directly in the forms area.  The CPA support at Turbo Tax knew nothing.  Now what I'm struggling with is that Turbo Tax insists that the state of Wisconsin does not recognize the expenses as deductible for Wisconsin, but they do.

[bbhesse]

I also should mention I entered it as tax exempt income and then a deduction for it, that way it also carries over correctly to the state and K-1's

[OTBTATL]

Thanks your response is the closest that I have seen and / or figured out myself. What I am going to do is "mail" in my return and on the PDF itself "type" using adobe acrobat's typing feature that this is PPP forgiveness. Otherwise it simply shows up as exempt interest. Everything does however flow 100% correctly in tems of the numbers. 

[usataxdue]

Would you mind sharing step-by-step instructions for the adjustments?

I've entered the PPP loan as 'other income' on the income tab, just typed 'PPP loan forgiven' - that is K-1, 16b

And also, selected the checkbox with the following wording "Had corporate debt cancelled, forgiven or terms modified" on the "About  your Business" page - that makes Schedule B, Line 12

How to make Schedule M1, Line 5a and Schedule M2, Col (a) AAA, Line 3 - can't figure out

[mcd8]

After reading this large thread I've learned a lot thanks. But I am unclear on 1 issue. I have entered the forgiveness portion of my PPP loan on my M-1 and my balance sheet is off by exactly that amount. Any suggestions as to where I went wrong? 

[bbhesse]

In Turbo Tax, Go to the Balance Sheet, Income reconciliation and quick entry, there you can enter it as tax exempt income. 

Accounting:

When you received the money you debited cash and credit PPP loan payable.  

When it was forgiven, you debit the PPP payable and credit OTHER Income.  This will show up as Tax Exempt income on your M-1 and on your K-1

And yes, when you enter it on the About your business, it will show up there as forgiven but it doesn't carry over to the Balance Sheet from there.

[bbhesse]

Look at the new note on the thread, and check to see if you entered it into your books like that, your tax return balance sheet should then match your books.

[bbhesse]

The problem is you can't enter it directly on the K-1, it has to flow through to it from the return.  Review the new note on the thread and check your entries on the return and in the accounting with that note

[shayjay83]

I have this same question. In an LLC partnership, so our "salaries" are just distributed as profit via K1. The way the final rules of the PPP are set up, it almost looks to me like this money could be distributed to myself and my partner, isn't documented anywhere and has no tax liability? Our operating expenses were deductible, but our K1/net pass through income is ONLY Based off of INCOME minus EXPENSES. If the loan is never recorded as income, then it never shows up on the k1. Lucky loophole for us?

[ReneeM7122]

Yes, the PPP loan is not taxable and not tax reportable.  It's a bookeeping item.

Here is a TurboTax article about the PPP loan.

@shayjay83

[bbhesse]

Yes but on the tax return for a corporation or s-corp most are required to file the return with a reconciled balance sheet to your books so it has to be accounted for in the return since you received a cash asset for it

[mcd8]

I understand the PPP is non taxable but is is still booked as income. Which I booked in my QuickBooks as non taxable income. The problem I am having is the business software will not let me go forward because I am out of balance by the amount of my PPP loan. I entered the amount on my M-1 as instructed in a prior post and it is still out of balance. Why does the software we paid for not even address the PPP loan?

[goldamityinc]

@DapperDave64  you are a 1120s tax master!!!! lifesaving advise. I was frustrated after googling this for hours, so glad I found your response. Worked perfectly. 

[Cheryl33]

So as a S-Corp filing a 1120S I do no need to show the forgiven PPP loan or the EIDG grant on my tax return or K-1's as it in not considered income?