topic PPP Loan Forgiveness in Get your taxes done using TurboTax

PPP Loan Forgiveness

csanford2 — Mon, 01 Mar 2021 14:06:12 GMT

How is the PPP Loan Forgiveness handled for tax purposes in an SCorp given the December 2020 ruling? Where is it discussed within TurboTax for Business?

Thank you!

Re: PPP Loan Forgiveness

ColeenD3 — Mon, 01 Mar 2021 15:14:46 GMT

The Paycheck Protection Program (PPP) is part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which consisted of government-backed loans to help small businesses and other eligible applicants continue covering payroll costs and certain operating expenses during the coronavirus (COVID-19) pandemic. These loans were available to:

Small businesses with less than 500 employees
Sole proprietorships
Independent contractors
Eligible self-employed individuals

Under certain criteria, and if you use the funds as directed by the SBA, the loan may be completely or partially forgiven. Go here to learn about PPP loan forgiveness.

For 1120S, assuming the debt was forgiven, you would answer "yes" to the question on line 12. It does get entered on line 16 of schedule K and the steps you took have allowed you to reconcile your balance sheet.

Re: PPP Loan Forgiveness

csanford2 — Tue, 02 Mar 2021 22:27:07 GMT

Thank you for your answer. You refer to line 12 - can you please tell me what form that refers to? Also you refer to line 16 on Schedule K. Is that Schedule K-1?

Thanks for your help!

Re: PPP Loan Forgiveness

ColeenD3 — Wed, 03 Mar 2021 16:06:26 GMT

Enter the amount and check yes on Line 12 of Schedule B on Form 1120-S as a debt that was forgiven. The PPP Loan amount also is reported on line 16, code B of the Shareholder K-1 as non taxable income that affects shareholder basis.

Enter the PPP Forgiven Loan amount as Other timing Income item on the Schedule M-1, it balance out the income tax/book differences and also move it to Schedule M-2 as an addition from the M-1 and as a negative Distribution to balance out the M-2 with the books.

Re: PPP Loan Forgiveness

csanford2 — Wed, 03 Mar 2021 20:43:41 GMT

Thank you so much! That was very helpful. Do you enter the PPP Loan amount directly on line 16 of the K-1 or is there a worksheet that is filled out that flows over to Line 16 of the K-1?

Thank you!

Re: PPP Loan Forgiveness

joverheul — Mon, 08 Mar 2021 21:18:04 GMT

@ColeenD3 Thank you for your insights regarding the M-1 and Form 1120-S entries to account for 2020 PPP Loan Forgiveness. After completing these steps, the Schedule K-1 still seems to reflect the non-taxable loan amount on Line 1 of the K-1 Schedule (i.e., Ordinary Business Income includes the full PPP loan amount). Is this correct? If yes, where should the non-taxable amount listed on K-1 Line 16b be reduced from taxable / gross income on the Shareholders 1040?

Re: PPP Loan Forgiveness

lec4 — Thu, 01 Apr 2021 20:43:19 GMT

How should the ppp loan forgiveness be entered on form1120

Re: PPP Loan Forgiveness

JamesG1 — Sun, 04 Apr 2021 17:43:39 GMT

You report the forgiven PPP loan as non-taxable income. In TurboTax Business for an 1120S member:

Across the top of the screen, click on Federal Taxes.
Click on Balance Sheet.
Enter Total Year-end assets. Click Continue.
Click No, I want to complete my balance sheet. Click Continue.
Under Your reconciliations and balance sheet, click on Edit to the right of Income reconciliation.
Click No, I’ll enter a different book income. Click Continue.
If non-taxable PPP loan is $10,000, taxable income for the year is $59,000, so book income must now be $69,000. Click Continue.
At Your reconciliations and balance sheet, make sure all three schedules are in balance.
Click on Forms mode.
Click on M-1 Worksheet. The forgiven PPP loan will be listed under Permanent Items (tax-exempt income).
Click on a K-1. The forgiven PPP loan will be listed under line 16 code B.

States vary on their treatment.