CARES act 6 Months SBA Payments - Tax-Line Mapping

[Idealtek]

I had 2 loans paid by SBA for 6 months. I created an "Other income" account to track it. What Tax line mapping applies? I have begun my TurboTax business return and now my balance sheet is out of balance by the amount of this account.

[MinhT1]

The SBA loans are not income. If they remain unpaid as of December 31, 2020, they are reported on the liabilities section of the balance sheet under Other Liabilities. This should balance your balance sheet.

[Idealtek]

I'm sorry but you have misunderstood the question.

I had 2 SBA Express Loans prior to COVID that were correctly identified as other liabilities.

in the CARES Act of 2020 SBA was directed to provide Debt relief in the form of making payments on my behalf for 6 months to those loans.

Congress has instructed that the debt relief payment is not taxable income as I am aware.

I have created an account in quickbooks to account for these payments on my behalf.  I named this account "Non-Taxable income - 2020" it is currently "unassigned " in tax-line mapping.

I have started to do my taxes with TurboTax Business 2020 all updates applied.

I get to the federal taxes screen and am Importing my Quickbooks data.

I am being asked on the "Tell Us What these are For" screen what account "Nontaxable income - 2020" account is for.

I tried telling it not to import that account but further into the return the balance sheet is out of balance by the amount of that account.

So My question remains how to I account for the SBA "Giving" me this money to pay down my SBA Loans?

Thank you for your assistance.

[JamesG1]

The SBA loans existed prior to the COVID pandemic.  You were not required to make payments and the interest and principal payments were made in your behalf as CARES Act payments.

The loan payments are nontaxable income to you and the difference may require an adjustment on your balance sheet.

Journal of Accountancy states:

Under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136, the SBA is authorized to pay six months of principal, interest, and fees on covered SBA loans. The Consolidated Appropriations Act, 2021, P.L. 116-260, provides that these payments are not includible in the borrower's gross income.

[will4211]

Seriously James, thats your answer.  The IRS says the loan payments are not income & the Interest & fees are tax deductiable.  So If you Debit loan debit interest & fees where does the credit go?????????

Thanks to anyone who can please answer this question...

[JamesG1]

Debit     Loan

  Credit     Tax exempt income

[will4211]

If you do that where do you record it on turbo tax form 1120S. That's what's so confusing because as I'm doing the tax return I find no guidance on how to report that adjustment. Can you help??

[JamesG1]

You report the forgiven PPP loan as nontaxable 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 nontaxable 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.

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 and they are changing rapidly.

[will4211]

I really do thank you for your response!!  But I am still confused. I've tried calling IRS for an answer but you 

cannot get anyone to answer the call.  My loan is NOT a PPP loan.  So what your saying is that I handle Payments

LIKE a PPP Loan??  I mean it sounds good to me but I'm just so unsure.. Thank you 

[JamesG1]

@will4211

Are you referring to the six months of SBA loan payments which CARES Act authorized?  These SBA loans existed prior to the COVID pandemic.  You were not required to make payments and the interest and principal payments were made in your behalf as CARES Act payments.  The loan payments are nontaxable income to you.

Journal of Accountancy states:

Under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136, the SBA is authorized to pay six months of principal, interest, and fees on covered SBA loans. The Consolidated Appropriations Act, 2021, P.L. 116-260, provides that these payments are not includible in the borrower's gross income.

[will4211]

Yes that is what I'm referring to.  Here is where I'm lost.  When working on the tax return using Turbo Tax business for SCorp.  There is no where to put non taxable income.  I do not know how to present it on the 1120 tax return.  No matter what I do it shows up as income.  

[will4211]

Did you ever figure out how this should be done???  

[micklsu]

Does anyone have the answer to this?  How to record the SBA making your loan payments on a prior to Covid SBA loan?  It is recorded in Quickbooks as other income, but should not be on the taxable income and TurboTax doesn't have a clear way to resolve this.

[DaveF1006]

@micklsu To clarify, does this show up in your return as other income? If so look on your 1040 and Schedule 1 and see where it is recorded.

[micklsu]

@DaveF1006 This is for a business, not a 1040,  1120S.