How to enter PPP loans and EIDL grants in Lacerte

This article will help you report Paycheck Protection Program (PPP) loan forgiveness and Economic Injury Disaster Loan (EIDL) advances on business returns. If you're working on a 1040, see How to enter PPP loans on individual (1040) returns, instead.

The data you’ll enter include:

• PPP loan forgiven. This is the amount of income from a forgiven Paycheck Protection Program loan that’s nontaxable for federal, but taxable to nonconforming states. Lacerte will automatically create a federal M-1 adjustment for this amount, as well.
• Expenses nondeductible to state related to a forgiven PPP loan. The Consolidated Appropriations Act (P.L. 116-260) made eligible expenses paid with forgiven PPP loan funds deductible on the federal return. Some states don’t conform to this provision, so expenses paid with the loans are not deductible on those state returns. If your return doesn’t include nonconforming states, you won’t see this field. 
• EIDL advance (grant). This is the amount of Economic Injury Disaster Loan advance received that's nontaxable for federal, but taxable to nonconforming states. Lacerte will automatically create a federal M-1 adjustment for this amount, as well.

Follow the steps for your return type to enter forgiven PPP loans or EIDL grants in Lacerte 2020 or 2021.

For partnership returns:

1. Go to Screen 10 Ordinary Income.
2. Enter the amount of Expenses nondeductible to state related to a forgiven PPP loan, if any.
3. Enter the amount of EIDL advance (grant), as well as other assistance addressed by Consolidated Appropriations Act section 278 (nontaxable for federal purposes, taxable in some states), if any.

The amount of PPP loan forgiven and/or EIDL advance will be reported on Schedule K, line 18b, as other tax-exempt income. An adjustment for the loans will generate on Schedule M-1, line 6. 

If you need to change or eliminate the automatic M-1 adjustment:

1. Go to Screen 27.1 Schedule M-1.
2. Scroll down to the Income Recorded on Books not Included on Schedule K section.
3. Enter the appropriate amount in PPP loan forgiven [O] or Nontaxable EIDL advance (grant) and other assistance [O]. Enter -1 to set the amount to zero.

For S-corporate returns:

1. Go to Screen 13 Ordinary Income.
2. Enter the amount of Total PPP loan forgiven (nontaxable for federal purposes, taxable in some states). 
3. Enter the amount of Expenses nondeductible to state related to a forgiven PPP loan, if any.
4. Enter the amount of EIDL advance (grant), as well as other assistance addressed by Consolidated Appropriations Act section 278 (nontaxable for federal purposes, taxable in some states), if any.

The amount of PPP loan forgiven and/or EIDL advance will be reported on Schedule K, line 16b, as other tax-exempt income. An adjustment for the loans will generate on Schedule M-1, line 5. 

If you need to change or eliminate the automatic M-1 adjustment:

1. Go to Screen 31.1 Schedule M-1.
2. Scroll down to the Income Recorded on Books not Included on Schedule K section.
3. Enter the appropriate amount in PPP loan forgiven [O] or EIDL advance (grant) [O]. Enter -1 to set the amount to zero.

For corporate returns:

1. Go to Screen 13 Income.
2. Enter the amount of Expenses nondeductible to state related to a forgiven PPP loan, if any.
3. Enter the amount of EIDL advance (grant) (nontaxable for federal purposes, taxable in some states), if any.

An adjustment for the loans will generate on Schedule M-1, line 7. 

If you need to change or eliminate the automatic M-1 adjustment:

1. Go to Screen 39.1 Schedule M-1, M-3.
2. Scroll down to the Income Recorded on Books not Included on this Return section.
3. Enter the appropriate amount in PPP loan forgiven [O] or Nontaxable EIDL advance (grant) and other assistance [O]. Enter -1 to set the amount to zero.

For exempt organization returns:

Per Form 990 instructions for Part VIII, line 1e,

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) established the Paycheck Protection Program (PPP) to provide loans to small businesses as a direct incentive to keep their workers on the payroll. The loans are forgiven if all employee retention criteria are met and the funds are used for eligible expenses. Amounts of PPP loans that are forgiven may be reported on line 1e as contributions from a governmental unit in the tax year that the amounts are forgiven.

Input for Part VIII line 1e, Government grants, can be found in Screen 16.1, Contributions, Gifts, and Grants under the Contributions, Gifts, Grants section.