@micklsu
The SBA Payments are considered "Other Tax-Exempt income" as a permanent tax/book reconciling item in the Other Adjustments Account on Schedule M-2. This tax-exempt income will increase shareholder basis in the S-Corporation, allowing the shareholder to deduct any losses, if applicable.
- Go to the forms section, open Sch M-1 Wks.
- Add the total SBA payments under Other Permanent income items in the Per Books column, using an appropriate description.
- Open a Schedule K-1 and verify the allocated portion for that member is shown on Line 16 using Code B.
- Confirm you have no form errors (red check marks).
- Save your return.
- Run Federal Review to be sure there are no errors.
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