Will Turbotax handle forgiven PPP loan?

[JamesG1]

Are you referring to EIDL or some other grant?

A forgiven PPP loan is reported as non-taxable interest. 

In TurboTax Business for an 1120S:

• Under Your Income, Investment Income, click Start / Update to the right of Interest and dividend income?
• At the screen, Tax-Exempt Interest, enter the forgiven PPP loan.
• The K-1 and M1 / M2 calculations should report correctly.  There may be other issues in your tax return that would cause the forms to be out of balance. 

This treatment allows basis to be correctly reported. 

States vary on their treatment.  This document may quickly be outdated as states and state departments of revenue respond to IRS conformity issues.

[bbhesse]

I'm glad it helped.  I have to say I was very disappointed that Turbo Tax didn't cover this better in the software and there was no support help.  The Turbo Tax support CPA I spoke with had no idea how to process this

[shimon]

I am using TT 1065 for my LLC partnership. I received $15,000 PPP loan that was forgiven. All $15,000 were used to pay the partners income.
In schedule M worksheet, I entered Permanent Tax Exempt Income $15,000.

My question, where should I enter the $15,000 income to the partner? Normally, payments to partners entered as distribution. However, recording it as distribution will be passed to K1 as taxable income to the partners. If I enter it as payroll expenses, TT ask me to issue W2.
Thanks for any suggestion.

[Critter-3]

According to the IRS is it NOT reported as income at all on the return.  

[shimon]

So my Balance sheet is off by $15,000. How do I balance it?

[Critter-3]

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.

[#7]

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.

[mcd8]

shimon I still can't find the answer to our issue of the balance sheet not matching either. Does not seen anybody else has the answer either. So we are stuck and cannot go forward with the Business software we paid for.

[shimon]

MCD8

Same problem with me. I am out of balance $15,000 the total amount paid to the partners and the amount forgiven is the same. I filed for extension for now. However, I will need to solve this problem because I can not file my personal tax return without the business tax return, I expecting large amount of money back from the IRS.

I hope TT will solve this problem.

[mcd8]

shimon Ditto I have filed for an extension as well and cannot file my business without my balance sheet in balance or personal without my 1120s. UGH I am beginning to think I wasted my money this year buying TT Business!!!!

[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 know a lot of people are talking about M-1 adjustments. I tried that and couldn't stay in balance and was stuck.  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 1120-S 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.

[JamesG1]

@mcd8

You report the forgiven PPP loan as non-taxable income.

In TurboTax Business for a partnership:  

• Under Your reconciliations and balance sheet, click on Edit to the right of Income reconciliation.
• PPP loan forgiveness will be a reconciling item on the M1 under Permanent items (tax exempt income).
• The K-1 and M1 / M2 calculations should report correctly.  There may be other issues in your tax return that would cause the forms to be out of balance. 

States vary on their treatment.  This document will quickly be outdated as states and state departments of revenue respond to IRS conformity issues.

[JulieD1]

Thank you for laying this out so clearly, very helpful!

[Vizsla1]

Can anyone tell me where the IRS says not to include this in income?   We're arguing with our CPA about this.  Thanks

[suenjgdinc]

...  https://www.uschamber.com/co/run/finance/tax-implications-of-paycheck-protection-loans#:~:text=Does%....

They should be able to look it up.  It's part of the CARES act that passed on 12/28/21.

https://www.irs.gov/[product key removed]h?search=PPP+deductible&field_pup_historical_1=1&field_pup_...

Eligible Paycheck Protection Program expenses now deductible

in this article on the IRS website there is a link to their code that explains the deductions are allowed and the loan is not taxable.

[bbhesse]

It was overturned in December to state that if the loan was forgiven in 2020, then there is no income reported, but the expenses were deductible.   I think I posted previously a link that documents that.  It is a book entry as income on your side, but not taxable on your return.