Question

Will Turbotax handle forgiven PPP loan?

Forum|Forum|5 years ago
January 4, 2021
8 replies
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Turbotax Business 2020 does not ask any questions about possible PPP loans that were received. Is Turbotax going to get an update that will address this, or are we on our own to figure out how to deal with forgiven PPP loans? Seems like a glaring hole in TT.

TurboTax Business Windows

Critter-3

PPP loans is a bookkeeping issue NOT an income tax issue.

In your books you will either :

1) count the loan proceeds as income and take the expenses you paid with it as deductible expenses like normal.

OR

2) enter the loan as a loan on the books and once it is forgiven you must also reduce your expenses by the amount of the forgiven loan.

Either method is correct as long as you are consistent in it's application ... option 1 is the easiest for most folks.

S

sansho1

Does this take into account the recent legislation, which seems to allow the "double-dip" benefit (i.e. the forgiven loan is NOT to be considered a portion of business gross income AND the expenses it paid are tax deductible)? The current TT Business software doesn't seem to currently account for this, as it throws off my balance sheet calculation not to report the funds at all -- after all, I received the money.

Rick19744

Employee

No glaring hole in TT.

As noted before, TT is not an accounting / bookkeeping software.

Your balance sheet is prepared based on your books and records.

You will need to prepare / include an adjustment in the Schedule M-1 section of the software to handle the difference between book and tax. No different than any other book/tax differences.

What you have here is income for book purposes NOT income for tax purposes.

*A reminder that posts in a forum such as this do not constitute tax advice.Also keep in mind the date of replies, as tax law changes.

W

whighfillAuthor

So many of these responses sound like I am supposed to be a tax pro. I am not a tax pro, I'm a tiny little business owner who can't afford a bookkeeper or a tax person, so I have to do all this on my own. Just like millions of others in the US.

As it turns out, it sounds like the legislation Congress passed right before Christmas changes everything. The PPP loan is not income, all the expenses related to it are deductible. Congress may have finally done something good and smart.

T

tegrimfa

Apologies if this is too simple a question. If we received a PPP loan and it was forgiven, I understand it is not taxable. We are a partnership so basically all of our income goes to partners. So how do I record this in business taxes and then is it taxable for each partner. We are actually talking about a small amount of money. Thanks for your help.

T

ThomasM125

If your PPP loan was forgiven, then you don't report it as income on your partnership tax return. If you used the funds for qualifying expenses, they are deductible as they would be otherwise. So, there would be no additional entries on your partnership tax return, simply leave the PPP proceeds off the return. It is not reportable on the partner K-1 schedules, as it is not taxable to the partners.

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G

GaryRichards

TT asks if any loans have been forgiven. I put the forgiven PPP loan amount in this cell and I am having the same problem with my balance sheet. You would think TT would have this all addressed so we wouldn't all be having the same problem figuring out how to address it on the returns.

C

chaplot

PPP was issued in 2020. Forgiveness will happen in early 2021. For a partnership entity,

a. Where to enter in Turbo Tax Business? As loan or something else?

b. How to account for salaries (distribution) paid from it to partners? Or As any expense ?
c. Will partners will have to pay FICA and taxes on it in their individual tax return as any regular income or do they have to do anything else? I believe some banks have cut FICA before distributing money as PPP.

d. In 2021 will need to figure out how to report it in Turbox Tax as forgiven loan. I can wait on it. 😀

it would have been very helpful had Turbo Tax issued any advisory for various possible entries in Turbo Tax on PPP. This is one of the most common question today. Cannot just say it is is book keeping issue and not tax issue. Or they should develop a wizard to derive to a correct answer. Thanks.

D

DianeW777

When the loan was received it would have been posted to cash and loan liability account (a title you likely made for your liability account). Keep in mind this is not income to the partnership at the time of the loan, read further about the forgiveness.

Any expenses paid from these loan proceeds are processed like any other cash expenses in your business. The expenses are not separated out for the books and records of the business even if it's necessary for your loan forgiveness.

Partners will pay any taxes due on their personal returns based on the income that flows over to their individual K-1s. This means they will pay their self-employment tax as usual. They should not receive W-2s as partners in a partnership.

2021 (or 2020 if you already know the loan is forgiven)

The loan will become tax exempt income in 2021, should you be forgiven. At that point it is not a loan and does not have to be repaid. It would be an adjustment to the capital account and removed from the liability account, at that time. This is how you will record it on the 1120S return in 2021.

For more information you can use this link: Instructions for Form 1065

Excerpt:
- Nonrecourse Loans. Nonrecourse loans are those liabilities of the partnership for which no partner or related person bears the economic risk of loss.
- Tax-exempt income. Do not include any tax-exempt income on lines 1a through 8. A partnership that receives any tax-exempt income other than interest, or holds any property or engages in any activity that produces tax-exempt income, reports this income on line 18b of Schedule K and in box 18 of Schedule K-1 using code B.

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C

chaplot

Thank you for detailed reply. Make sense.

J

joerosenbaum

I use QuickBooks for my Sub-S and TurboTax Business for tax return purposes. Is there an Intuit best practices solution to allow TurboTax to seamlessly upload the appropriate info for PPP loan forgiveness?

Critter-3

If you properly enter the PPP loan as a loan in the QB program and transfer the funds to the checking account then the bookkeeping is correct and so will be the return. You will have to make an adjusting entry to balance the books on the return.

L

liletrm

Was looking for answer all over the place, as TT doesn't even have a probe question about this. As everyone has mentioned, 1) forgiven PPP loan is not taxable and 2) expenses paid from it can be deducted. Not an accountant but just gleaned from everything I've read ...

On P/L statement: forgiven PPP loan is under "Other Income": needs to be recorded in our books as, after all, it did get deposited and was used to pay for expenses.

On Business TT: 1) when entering Income items, do not include this "Other Income: forgiven PPP loan";

2) Enter all Deduction items as usual;

3) Income/Reconciliation (M1): Enter your P/L's Net Income and other adjustments, as usual, then under #7, I, "Other Income on books not on return"(which is what this is), add in the forgiven PPP loan amount.

This worked for me and everything balanced. Total Income did not include PPP forgiven amount, all expenses including those paid with PPP were part of deductions, and this same PPP is still reflected on taxes via M1.

Hope this helps.

E

ezfloss

Will TurboTax handle forgiven PPP loans? Yes, but incorrectly in the California Partnership program.

The TurboTax California program asks if a partnership received a PPP loan that was forgiven. If you say yes it asks whether the loan was forgiven between 4/1/21 and 6/30/21 which is the extension period created by the PPPEA (Public Law 117-6).

The FTB (https://www.ftb.ca.gov/about-ftb/newsroom/covid-19/paycheck-protection-program-loan-forgiveness.html) however explicitly states that "California law does not conform to this extension and does not allow an exclusion from income for PPP loans made after March 31, 2021." not loans forgiven after March 31, 2021.

A

AFZAL KHAN

How to get to LLP -K3 data for Phillips 66 partners? It’s not in down load for 2021

Critter-3

The K-3 form information is useless and you don't need it to file a personal tax return ... this is really for the partnership return. https://www.irs.gov/pub/irs-pdf/f1065sk3.pdf