Tax-Exempt EIDL Advance

[PsyGuy]

Using both Turbotax Business and Turbotax Premier.  I am using IRS Form 1120-S to file business return.  Turbotax Business doesn't appear to directly address how to report $1,000 tax exempt EIDL advance loan.  Searched "report eidl tax-exempt loan for turbotax business" and was directed to Intuit community (https://ttlc.intuit.com/community/business-taxes/discussion/how-is-eidl-advance-reported-on-1120s/00... Was instructed to report loan on Form 1120-S line 16(b) on page 4.  I entered the payment as recommended.  During review, I received the following message: "Check This Entry"  "Schedule M-1 Items Worksheet:  Book-TxExempt Int-OutState If you want to use the Schedule M-1 worksheet, please delete entries made on Schedule K, Line 16b and/or the Smart Worksheet above it and re-enter tax-exempt income items on the Schedule M-1 worksheet instead."  It was not clear to me why that action was being recommended, nor what impact it would have were I to do as suggested.  Whether appropriate or not, I chose to leave things as they were on Form 1120-S line 16(b) on page 4.  As of yet, I have not filed my business returns.  What is recommended for this situation?

I then turned to my personal return using Turbotax Premier.  When entering information from IRS Schedule K-1, I encountered the screen “Enter Income Detail”. “Enter the amount paid and the name of the state that paid tax-exempt interest reported on box 16, Code A of your K-1 for (Firm Name).”  This refers to the EIDL Advance payment mentioned above.  As the payment was made by the IRS, the question about the State Name does not apply.  The drop down menu does not have an option to identify an IRS (federal) payment.

What is recommended for this situation?  Will other issue arise later in the program linked to this issue?

[npierson7 · Accepted solution]

The first part of your question, whether you enter the $1,000 tax exempt EIDL advance loan on Schedule M-1 worksheet or Schedule K, Line 16b, it will be still non-taxable income for you, although entering it on Schedule M-1 is technically correct way.

As for the second part of your question, despite the EIDL was paid by federals, it went though you state, and you need to enter there name of your state. 

[PsyGuy]

Thanks npierson7.  Your reply, particularly with regard to the personal filing, was helpful.  As for the business filing, the due date was fast approaching.  I followed the advice from another poster who indicated that it was necessary to enter the EIDL loan on Form M1 first, and TT would then load the entry onto line 16b.  The response also suggested that doing so would allow the accounting to be in balance.  That indeed seemed to be the case.

As for the personal filing under TT Premier, I will follow your recommendation of indicating the tax-exempt income came from my home state.  I truly appreciate your interest in my question, and your response.  Stay well!