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). Forgiven PPP loans and EIDL grants are considered “Other Tax Exempt Income” for federal purposes and will be reported on Schedule K-1 box 16B (S-corporations) or 18B (partnerships). We provide third-party links as a convenience and for informational purposes only.
It will be helpful to track this information on spreadsheets or through QuickBooks®. Congress passed a series of acts in an attempt to ease the economic burden placed on businesses caused by restrictions due to COVID-19. One of these, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, created the Paycheck Protection Program (PPP). This program allowed for eligible businesses throughout the country to apply and receive loans from essential qualifier lenders to continue to pay employees, even if those businesses reduced hours or were closed. Currently, we are entering the period where many of these businesses have spent their PPP loan funds and are needing to apply for forgiveness of these loans. PPP loans may also be used to refinance certain Economic Injury Disaster Loans (EIDL) where the borrower received funds from Jan. 31, 2020, to April 3, 2020.
How do you qualify for the PPP Loan, and what can you receive?
Loan payments of principal and interest are deferred as long as you apply for forgiveness within 10 months after the last day of your Covered Period, although interest will continue to accrue during this period. PPP borrowers that have fewer than 300 employees and can show a reduction of at least 25% in revenue in 2020 compared to their 2019 revenue are eligible for a second PPP loan.2 The maximum loan amount for PPP second-time borrowers is $2 million. In addition to the application within QuickBooks Capital, QuickBooks is partnering with SBA-approved lender Cross River Bank (CRB) to facilitate second PPP loans for eligible customers. Please note that your business may be eligible for a higher loan amount through them directly or another SBA-approved lender . If you’re working on a 1040, see How to enter PPP loans on individual (1040) returns, instead.
To enter EIDL grants for Schedule C, Schedule E, or Schedule F:
Spending time on the front end by setting up the recordkeeping and processes will save a lot of time in the long term. Most borrowers can choose which time period to use for comparison, but seasonal applicants may choose either of the above reference periods or any consecutive 12-week period between May 1, 2019, and Sept. 15, 2019. In the event that the lender doesn’t provide a good calculator, a spreadsheet will be required if there are more than a handful of employees.
Eligible payroll costs
In addition, this is neither an exhaustive list nor will all SBA-approved lenders require all items listed, as each lender appears to have their own due diligence requirements. I havent seen the forgiveness application, Square Capital hasnt made it available yet for me. Read more about the step-by-step application process for eligible QuickBooks customers here. Follow the steps for your return type to enter forgiven PPP loans or EIDL grants.
The application period began on April 3, 2020, and runs through the earlier of June 1, 2020, or when all the funds have been committed. The PPP loan carries a maturity of five years (two years for those loans made before the June 5, 2020, date the PPP Flexibility Act was passed, unless the borrower and lender agree to extend the maturity period to five years) and a 1% interest rate. If there are no nonconforming states on your return, you don’t need to enter the amount of EIDL advance (grant) received. The options below should only be used to include the EIDL amount as income on a state return when required. If there are no nonconforming states on a return, you don’t need to enter the deductible expenses that were paid with a forgiven PPP loan. The forgiven loan isn’t considered taxable income, and the expenses paid with it are still deductible for federal purposes.
To generate a PPP forgiveness statement:
- For information on the second stimulus relief package, the Coronavirus Response and Relief Supplemental Appropriations Act of 2021, please visit the second post here.
- If your client has employees, their loan forgiveness amount may be reduced as a result of reductions to employee headcount or wages.
- Payroll costs are calculated on a gross basis, without subtracting federal taxes that are imposed on the employee or withheld from employees’ wages.
- This content is for the first stimulus relief package, The Coronavirus Aid, Relief and Economic Security Act (CARES Act), which was signed into law in March 2020.
The hope is that if businesses can keep employees on the payroll now, they’ll be in a better position to recover fully. And as a result, fewer people will be jobless and in need of additional federal aid. And if they meet certain criteria, borrowers can request loan forgiveness.
If you do not apply for forgiveness within 10 months from the end of the maximum 24-week LFCP, your Deferment Period will end at this time. If you use less than 60% of your PPP funds on eligible payroll costs, you will only be eligible for partial loan forgiveness. Borrowers can apply for approximately 2.5 times their average qualified monthly payroll expenses, up to $10 million and subject to certain restrictions.
Payroll costs do not include employee or owner compensation over $100,000/year or compensation for persons who live outside the U.S. Payroll costs also do not include qualified sick and family leave covered by the Families First Coronavirus Response Act. Additional rules may apply to seasonal businesses, new businesses, farmers and ranchers, partnerships, and borrowers with income from self-employment. For eligible QuickBooks customers, CRB will originate and service the loans, as well as manage the forgiveness process.
- The forgiven loan isn’t considered taxable income, and the expenses paid with it are still deductible for federal purposes.
- Unless the business really attempted to stretch the funds or didn’t use the funds as required, there should be enough expenses on Line 1 under cash compensation to cover the loan proceeds.
- If you do not apply for forgiveness within 10 months from the end of the maximum 24-week LFCP, your Deferment Period will end at this time.
- Accordingly, the information provided should not be relied upon as a substitute for independent research.
- Department of the Treasury on the PPP are evolving rapidly and the information contained herein may be outdated.
I have attempted this, and each intuit ppp loan time the lender has come back with requests for more documentation. It is similar to the level of how mortgage lenders require so much documentation. Therefore, on the last couple of applications, we simply provided the above outlined documentation, and as of the writing of this, none of the lenders have come back requesting more.
Intuit Inc. does not warrant that the material contained herein will continue to be accurate, nor that it is completely free of errors when published. Paycheck Protection Program loans are intended primarily for payroll costs. So when it comes to whether a loan is forgivable, no more than 40% of the forgivable amount may be for eligible non-payroll costs.
A PPP loan must be used to refinance an EIDL loan where the borrower used the EIDL loan funds to pay payroll costs. The law creates a further simplified PPP loan forgiveness application for loans of $150,000 or less. The PPP borrower will only need to sign and submit a one-page certification. The law requires the SBA to establish this form within 24 days of enactment. This simplified loan forgiveness process is retroactive and will apply to PPP loans of $150,000 or less, including loans from the first round of funding.
Eligible businesses can quickly apply for a second PPP loan using their business data already available in their QuickBooks account. QuickBooks Capital has also partnered with SBA-approved lender Cross River Bank to help additional eligible customers facilitate PPP applications directly through Cross River Bank’s platform. You do not need to make any payments on your PPP loan (“Deferment Period”) until you file for forgiveness, and the SBA pays your forgiveness amount to your lender or notifies your lender that you are not eligible for forgiveness.