Will Turbotax handle forgiven PPP loan?

[MJS12]

I also have the same question. Will TT provide the means to address this issue? IRS requires several items contained in a statement attached to the 1040 related to the PPP loan and its forgiveness.

[GeorgeM777]

Yes, TurboTax for 2021 will produce the PPP forgiveness loan statement.  To enter the information regarding your PPP loan forgiveness, go to Wages & Income, then scroll down the page and find the Less Common Income section.  At the bottom of the Less Common Income section, select Miscellaneous Income.  On the next page, you will see an option for Forgiveness of PPP loans.  Select Forgiveness of PPP loans and respond to the questions when prompted.

Here is a picture of the top part of the Statement we produced in our test return.  

@MJS12

[MJS12]

Thanks for the quick reply. This answers my question perfectly. I’ll give it a try soon. 

[liletrm]

Was looking for answer all over the place, as TT doesn't even have a probe question about this. As everyone has mentioned, 1) forgiven PPP loan is not taxable and 2) expenses paid from it can be deducted.  Not an accountant but just gleaned from everything I've read ...

On P/L statement: forgiven PPP loan is under "Other Income": needs to be recorded in our books as, after all,  it did get deposited and was used to pay for expenses.

On Business TT: 1)  when entering Income items, do not include this "Other Income:  forgiven PPP loan";

2) Enter all Deduction items as usual;

3)  Income/Reconciliation (M1):  Enter your P/L's Net Income and other adjustments, as usual, then under #7, I, "Other Income on books not on return"(which is what this is), add in the forgiven PPP loan amount.

This worked for me and everything balanced.  Total Income did not include PPP forgiven amount, all expenses including those paid with PPP were part of deductions, and this same PPP is still reflected on taxes via M1.

Hope this helps.

[mcd8]

It's hard to explain in an email for me, but I will give it my best shot.

In Turbo Tax Business when I come to the balance sheet section it is telling me I'm out of balance. I'm also off the same amount on my retained earnings statement.  The amount out of balance is the exact amount I got in a PPP loan in 2020. When I got the loan I put the dollar amount in an account named "long term loan". When it was forgiven I did a JE on 12/31/20 to remove it from Long Term Loan account to my checking account. I'm sure that is where I did something wrong but I don't know what to do to fix it. 

On my 2020 taxes I did the PPP loan entry on line 16B (Other Tax-Exempt Income) and my Balance Sheet and Retained earnings matched.

Any advice would be greatly appreciated.

[PatriciaV]

@mcd8

Please clarify 1) when you received notice that your PPP Loan was forgiven and 2) if the loan balance was shown as a liability on the balance sheet of your 2020 tax return.

[mcd8]

The PPP loan was forgiven in 2020 so I did a JE in QuickBooks dated 12/31/2020. Therefore the loan amount does not show up on my 2020 balance sheet and the money shows up as revenue in my checking account.

On my 2020 1120-S I entered the PPP loan amount on line 16b which reduces the amount on revenue but puts my balance sheet out of line. I hope this makes sense.

[ThomasM125]

@mcd8  What may have happen is your beginning retained earnings on line 1 of schedule M-2 was taken from your prior year tax return which was less than what was on your books since the PPP income increased it for book purposes but not for tax purposes.

To correct it, you may need to add the income to retained earnings on schedule M-2 by making an entry under line 3 (Other increases.)  That will increase your retained earnings on your balance sheet and that may bring it into balance.

[ezfloss]

Will TurboTax handle forgiven PPP loans? Yes, but incorrectly in the California Partnership program.

The TurboTax California program asks if a partnership received a PPP loan that was forgiven. If you say yes it asks whether the loan was forgiven between 4/1/21 and 6/30/21 which is the extension period created by the PPPEA (Public Law 117-6). 

The FTB (https://www.ftb.ca.gov/about-ftb/newsroom/covid-19/paycheck-protection-program-loan-forgiveness.html) however explicitly states that "California law does not conform to this extension and does not allow an exclusion from income for PPP loans made after March 31, 2021." not loans forgiven after March 31, 2021.

[kmnapoli]

Hi George 

I have a question for the ppp statement

1) why do you put the taxes for 2020 and 2021 in the ppp loan statement? should be only 2021?

2) under the statement there are 3 options: 1) as, and to the extent that

 expenses are paid or incurred  2) when forgiveness is applied for; or 3) when forgiveness is granted

which one do I choose?

3) why did you choose that the forgiveness of the ppp loan has not to be granted as of the date the return is filed.

Sorry but I am all confused!!!

[AliciaP1]

For 2021 the IRS requires you report the expenses you paid with your forgiven funds and you report those expenses for 2020 if your 2020 funding was forgiven in 2021.

The questions are in regard to when you recognized the expenses that were covered by the PPP funds:

1. if you claimed the expenses when you paid them
2. if you claimed the  expenses when you applied for forgiveness
3. or if you claimed the expenses when you were granted forgiveness

So this really matters if you had a 2020 loan that wasn't forgiven until 2021, but if you recognized the expenses on your 2020 tax return your answer is 1 (for example).

If you are filing your 2021 return and you have not yet received notification that your loan is forgiven, you will answer "PPP forgiveness not granted at the time of filing the return".

@kmnapoli

[mcd8]

ThomasM125 this is exactly what is happening. Could you please direct me to how make the entry on schedule M-2. When I open Sch M-2 Wks I do not see a line 3 nor will it accept any entries.

[mcd8]

ThomasM125 Maybe my issue started on my 2020 return. I noticed on Schedule L for 2020 line 24 it list my retained earnings less the PPP loan amount and on line 25 it shows the PPP loan amount.  Thoughts? Direction? 

[glenn6770362]

but what about how the California return handles loans forgiven during the extension period? Turbotax claims forgiveness during the extension period is important. California documentation doesn't say that.

[ThomasM125]

The PPP loan forgiveness amount belongs in Retained Earnings, since it is book income. It shows on line 25, so the total of the two is correct. So, you need to add the amount listed on line 25 to the amount on line 24 and remove the line 25 entry.

You can use the Forms Mode to bring up Form 1120-S p3-5. On schedule M-2 you can make entries directly on line 3. You can also delete the entry on line 25. You can click on the number listed on line 24 Retained earnings and you will see a spy glass icon that you can use to bring up the Schedule M-2/Retained Earnings Worksheet to make changed to retained earnings.

@mcd8