Can and how to input PPP loan forgiveness into Lacerte?

[bill16]

how to input PPP loan forgiveness

[sjrcpa]

What type of return are you preparing?

[bill16]

1120 S

Txs

[sjrcpa]

M-1 Income on books not on return. It goes in OAA on M-2.

[TaxGuyBill]

I just posted this on another thread, but doesn't that amount increase Basis?  If so, where do you enter it so the K-1 shows that in the Basis box?

[sjrcpa]

Yes it does increase basis. There is no basis shown on an S Corp K-1, or on a 1065 K-1 for that matter. Tax basis capital on 1065 K-1s may or may not equal basis.

If the software is calculating shareholder or partner basis, I assume it would pick up this tax exempt income and add to basis, but I could be wrong. Haven't tested it yet. If it doesn't, I would input in the Other Increases to Basis line.

[sjrcpa]

OK I got curious. For an S Corp shareholder it does add it to shareholder basis.

[TaxGuyBill]

But Box 16 of the K-1 would be affected, so you can't ONLY enter it on the Balance Sheet and M1.  As you said, you need to enter it somewhere as tax-exempt income so Box 16 is affected, right?

[IRonMaN]

Sounds right.

[sjrcpa]

My Lacerte test put it in as 16B on the K-1.

[JohnCPACFP]

Schedule M-1, Other tax-exempt income.  You will have to determine if your state follows the fed.

[KJ2]

s corp

[DLP]

Lacerte added an input field on screen 31 for PPP loan forgiven, but it's an override field.  It also doesn't appear to be calculating currently either to OAA, basis schedule or M-1.  Anybody seen a non-override field?

[JohnCPACFP]

They added a field in Income (Screen 13) for the PPP loan.  However, it doesn't work at all and doesn't show up anywhere.   Entering it on M-1, as Other Tax-exempt Income, will carry it to Book Income, OAA, and Basis where it should be found. 

[accoun5]

So far, California treats the $1K EIDG grant as taxable income for California. Is there an input field in Lacerte to input taxable EIDG grant for California? In the Screen 16 for individual module Schedule C, I only see an input field to enter expenses paid with PPP loan. Nothing about the EIDG grant.

[JohnCPACFP]

There is a place for PPP forgiveness in the 1120S and 1065, but not Schedule C (yet).  The line for PPP forgiveness should include EIDL grants and loans, since they all the same for tax purposes, but it doesn't mention either one.    There is suppose to be a line for nonconforming states, but it hasn't been implemented yet.  Expenses paid with PPP money is a moot point after the 12/27 bill and should not be a factor anywhere.

[accoun5]

Thanks-I appreciate it.

[Jamiejs2]

If the Expenses paid with the PPP Loan (Forgiven) are "moot," should they reduce the cost of whatever was purchased with them? One of my S-Corp clients bought Inventory with it. Does that reduce the Cost of Sales "Purchases"?

[abctax55]

@Jamiejs2 

No.

[Jamiejs2]

Thank you. Sorry, but I made a "late night-working too long" boo-boo. The Inventory purchases were made with another, not PPP, loan. The PPP loan did pay the wages. Are the Wages reduced by the amount of the Forgiven PPP Loan? Or does that also go on the K-1, at line 16c? Appreciate your help!

[TaxGuyBill]

The PPP, including the forgiven PPP, don't affect ANY deductions.

Yes, the forgiven amount is entered on Schedule K as tax-exempt income.

[Jamiejs2]

The Forgiven amount on K-1, Line 16B, and the Expenses paid with it on K-1, Line 16B?

[TaxGuyBill]

Don't do ANYTHING different with deductions.  PPP does not change anything with the deductions.

[Jamiejs2]

The PPP Loan is $40,000. Since it goes on the K-1, Line 16B, the S/H Equity is increased by $40,000, and the Balance Sheet is off by $40,000.  What Journal Entry should the client have made when the Loan was forgiven?