PPP Loan Forgiveness

Forum|Forum|5 years ago
March 1, 2021
7 replies
33 views

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!

ColeenD3

Level 15

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.

csanford2Author

Level 2

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!

ColeenD3

Level 15

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.