After struggling with how to get the tax free EIDL grant money onto the 1120S I finally found a way to make it work within TT. I'm not an accountant but my accountant has signed off on this return and the way I did it.
Line 1) Gross Receipts or Sales does NOT include the EIDL grant. That gives you a correct taxable line 21) Ordinary business income (loss). And that correct taxable number flows through to the Schedule K and on to the Schedule K-1(s).
Then go to the Forms method of data entry instead of the Step by Step method. Go to Form 1120S, p3-5 and enter the EIDL grant money on Schedule K, line 16b) directly or via the M-1 worksheet as 'suggested' by TT right on the form above line 16b). Either way seems to be fine. That flows nicely to the M-1 which now has line 1) correct as the Net income (loss) per books and the correct taxable income on line 8).
For one of the returns I'm doing TT then placed the EIDL amount on the Schedule L Balance Sheet, line 25) Adjustments to shareholders' equity which messes up the Balance Sheet. I Overrode that line 25) entry and deleted it and then everything looked good and TT said there were no errors. This only happened one one company's return.
Lastly TT put the EIDL amount under Schedule M-2 column d). Adding all the columns on line 8 gives the correct Retained Earnings amount that transfers to the Schedule L, line 24.
Anyway, that's what worked for me and I'll use it for the other company returns I'm doing. Once again, I'm not an accountant so take all this as a suggestion only.
