Fixed Assets and UltraTax CS 2023 help is now on Help and Support. We're still moving articles, but you can find most content for the 2023 tax year there. Continue using the Help & How-To Center for tax years 2022 and older.
Proceeds:
Forgiven PPP loan proceeds are excluded from taxable income and are treated as tax-exempt income. For S-Corporations, the forgiven PPP loan proceeds increase the shareholder's basis in the S-Corporation stock and increase the Other Adjustments Account (OAA).
Expenses:
Eligible expenses paid with forgiven PPP loan proceeds are fully deductible. For S-Corporations, expenses paid with forgiven PPP loan proceeds should not reduce the Accumulated Adjustments Account (AAA). These expenses instead reduce the OAA.
Additional reporting statement:
The 2021 Form 1120 and Form 1120-S instructions require additional reporting for corporations that have tax-exempt income resulting from the forgiveness of a PPP loan. The following information must be included in a statement with the tax return:
The corporation’s name, address, and EIN;
A statement that the corporation is applying or applied section 3.01(1), (2), or (3) of Rev. Proc. 2021-48 as applicable;
The amount of tax-exempt income from forgiveness of the PPP loan the corporation is treating as received or accrued; and
Whether forgiveness of the PPP loan has been granted as of the date the return is filed.
UltraTax CS prints this information in a required statement based on the data entered in the statement dialog attached to the PPP loan forgiveness field in Screen Mc or Ms in the Balance Sheet folder.
Electronic file:
UltraTax CS automatically includes the additional reporting statement in the electronic file when you enter data in the statement dialog attached to the PPP loan forgiveness field in Screen Mc or Ms.
Data entry for PPP loans for C and S-Corporations:
PPP loans included in book income and Schedule M-1 is printing
Go to the Mc or Ms screen, in the Balance Sheet folder.
Enter data in the statement dialog attached to the PPP loan forgiveness field.
For an S-Corporation, enter expenses in the Current year expenses paid from forgiven PPP loans and/or the Prior year expenses paid from forgiven PPP loans in Screen Ms.
UltraTax CS reporting of data entry:
Forgiven PPP loan proceeds is reported on Schedule M-1 as income on books not on return.
For an S-Corporation, forgiven PPP loan proceeds is also reported on
Schedule K, line 16b
Schedule K-1, Box 16B
Shareholder’s Basis Worksheet, Page 1, Line 7
Schedule M-2, line 3(d)
For an S-Corporation, both current-year and prior-year expenses paid with proceeds from forgiven PPP loans are reported on Schedule M-2, lines 3(a) and 5(d).
A required statement based on the data entered in the PPP loan forgiveness statement dialog.
PPP loans included in book income and Schedule M-3 is printing
Go to the Mc or Ms screen, in the Balance Sheet folder.
Enter data in the statement dialog attached to the PPP loan forgiveness field.
For an S-Corporation, enter expenses in the Current year expenses paid from forgiven PPP loans and/or the Prior year expenses paid from forgiven PPP loans in Screen Ms.
Go to the M3-2 or M3S-2 screen
Click on the statement dialog attached to the Other income(loss) items with differences field. Enter forgiven PPP loan proceeds as a positive amount in the Income Statement column and as a negative amount in the Permanent Difference column.
For an S-Corporation, enter forgiven PPP loan proceeds in statement dialog attached to the Schedule M-2 other additions field in Screen M3S-2. Select code O in the Sch M-2 column in the statement dialog.
UltraTax CS reporting of data entry:
Forgiven PPP loan proceeds is reported on Schedule M-3, page 2 as Other income (loss) items with differences.
For an S-Corporation, forgiven PPP loan proceeds are also reported on:
Schedule K, line 16b
Schedule K-1, Box 16B
Shareholder’s Basis Worksheet, Page 1, Line 7
Schedule M-2, line 3(d)
For an S-Corporation, both current-year and prior-year expenses paid with proceeds from forgiven PPP loans are reported on Schedule M-2, lines 3(a) and 5(d).
A required statement based on the data entered in the PPP loan forgiveness statement dialog.
PPP loans not included in book income
No data entry is needed on the Mc/Ms or M3-2/M3S-2 screens since the forgiven PPP loan proceeds is not taxable income. The Book / Tax reconciliation item is not needed if the forgiven PPP loan proceeds is not included in the book income.
The 2021 Form 1120 and Form 1120-S instructions require additional reporting for corporations that have tax-exempt income resulting from the forgiveness of a PPP loan. The following information must be included in a statement with the tax return: The corporation's name, address, and EIN.
Forgiven PPP loans are considered "Other Tax Exempt Income" for federal purposes and will be reported on Schedule K-1 box 16B (S-corporations) or 18B (partnerships). This amount increases the shareholder's or partner's basis.
Go to Income/Deductions > Schedule K Other Income Deductions > Section 12 – PPP Loans, EIDL and Other COVID Grants or Subsidies to enter PPP loan forgiveness amounts (Interview Form K-3, Box 30, Class Code “PPL”).
At that time, your organization will record the loan forgiveness as revenue from the SBA. This will also be the time that the revenue is recorded on your Organization's Form 990 and corresponding entry on the Schedule B as a contribution from the SBA.
Forgiveness of PPP loan proceeds should be recorded as income from continuing operations,as a separate line item. of loan forgiveness from the U.S. government is received.
When the loan is forgiven, the business will not receive a 1099-C. If the loan is forgiven in 2021, however, the business does need to include a statement in its tax return regarding the forgiven loan. Note: Employers who received a PPP loan cannot claim the Employee Retention Credit against their payroll withholdings.
Fraudulent loan forgiveness may result in serious penalties.
Providing false statements or misleading information or intentionally omitting information for your loan forgiveness application may result in up to five years in prison, a civil fine of up to $250,000, or both.
Adjustments to Schedule M-2: The 1120-S, Schedule M-2, column (d) line 3 is automatically adjusted by the entry on the K screen: "An S corporation should include tax-exempt income from the forgiveness of PPP loans in column (d) on line 3 of the Schedule M-2."
If you need to report it as Other income, because the Taxpayer need to payback the PPP Loan, you can use Line 6 on the Schedule C, page 1 or on Form 1040, Schedule 1, line 8z.
A corporation that has tax-exempt income resulting from the forgiveness of a PPP loan must attach a statement to their return titled "RP2021-48" including the following information about each loan received: The corporation's name, address, and EIN. The amount of tax-exempt income from the forgiveness of the PPP loan.
The amount should be reported as tax-exempt income on your tax return. It would show up on line 16(a) of schedule K on a form 1120-S and line 18(b) on schedule K of form 1065. If you followed the instruction of @JamesG1, it should be there already.
Forgiveness of a PPP loan is a non-taxable transfer of a liability to equity. Use a journal entry to transfer the liability to an equity account, as already explained. From there, distribute the same way you would ordinary profits.
Note that the PPP loan itself triggers no income tax consequence. When the loan is forgiven, the business will not receive a 1099-C. If the loan is forgiven in 2021, however, the business does need to include a statement in its tax return regarding the forgiven loan.
'' The deductibility of business expenses paid with forgiven PPP loans is effective for subsequent PPP loans, as well as for business expenses paid with emergency Economic Injury Disaster Loan (EIDL) grants and targeted EIDL advances.
Borrowers must meet requirements for PPP loan forgiveness
If taxpayers meet certain requirements, the loans are forgiven. Generally, forgiven loans are taxable as discharge of debt income. However, a taxpayer may exclude from income the cancelled amount of an eligible PPP loan.
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