My first PPP loan and Virginia State return

[Possi]

My client received his PPP loan for $20,800. (he had no payroll and his business did not suffer, btw)

He included the PPP amount in his gross receipts on his P&L.

Am I right in my research, that it is not considered income, even if it is forgiven? And, expenses paid with PPP money are still deductible? 

THEN..... If it's not taxable to the Feds, but it IS taxable to Virginia, has anyone negotiated that on the VA return yet? I'll call Richmond for assistance if not, and post my results. 

[BulldogTom]

6 minutes ago, Possi said:

Am I right in my research, that it is not considered income, even if it is forgiven? And, expenses paid with PPP money are still deductible? 

On the federal, you are correct IF the loan is or will be forgiven by the bank.  (No payroll, no impact, ??? how he is getting it forgiven?)

Can't help on VA, but in CA I have been adding back to form California Adjustments in the "other" line for business income with a note that it is PPP forgiveness.   CA is still working on conformity regarding this issue, but they cannot agree on letting go of the tax revenue.  If they ever do conform, I will have some amending to do.

Tom
Modesto, CA

[TAXMAN]

I can't see where VA makes you add it back since they conformed on 3-8-2021. If you check with state let us all know please.

[Possi]

48 minutes ago, TAXMAN said:

I can't see where VA makes you add it back since they conformed on 3-8-2021. If you check with state let us all know please.

The latest I had was March 2, so you have updated information. Thanks. I'll go with that!

[Possi]

Do I NOT include the PPP loan as income? 

[Lynn EA USTCP in Louisiana]

PPP loan, even if forgiven, is not included in income.  Expenses paid with the PPP loan proceeds are fully deductible.

[Possi]

6 minutes ago, Lynn EA USTCP in Louisiana said:

PPP loan, even if forgiven, is not included in income.  Expenses paid with the PPP loan proceeds are fully deductible.

Thank you. Amazing. 

[TAXMAN]

Have to agree with Lynn in this case, however the states may require different avenues. Maybe we can get some people to tell us how their state is handling

this sort of thing. 

[jasdlm]

There is a tax in ATX to record PPP forgiveness and expenses paid.  Far as I can tell it does nothing.  You still have to manually enter to M1.  Hmmm.

[Abby Normal]

7 minutes ago, jasdlm said:

There is a tax in ATX to record PPP forgiveness and expenses paid.  Far as I can tell it does nothing.  You still have to manually enter to M1.  Hmmm.

If you enter on Sch K as a nontaxable income, it should flow to M-1. You should also show this on the books as other income.

This has the added benefit of flowing to the basis worksheet.

[jasdlm]

 

Just now, Abby Normal said:

If you enter on Sch K as a nontaxable income, it should flow to M-1. You should also show this on the books as other income.

This has the added benefit of flowing to the basis worksheet.

Thanks, Abby.  I do have it on their books as other income.  I should have twigged to entering on Schedule K - M-1 flow-through.  I hate it when I make things harder than they should be.

[Possi]

6 minutes ago, Abby Normal said:

If you enter on Sch K as a nontaxable income, it should flow to M-1. You should also show this on the books as other income.

This has the added benefit of flowing to the basis worksheet.

Wait... there's a K1? This is my first one, and he didn't give me a K1. I sure hope he's telling me the right figure. grrrr

[Lion EA]

If your client is a Partnership or S-Corporation, you're preparing Schedule K which does what others mentioned above.

Balancing these are driving me crazy, and the deadline's Monday! Plus, we get our second vaccinations tomorrow and have heard about the side effects, so I might lose workdays.

[Lynn EA USTCP in Louisiana]

24 minutes ago, Possi said:

Wait... there's a K1? This is my first one, and he didn't give me a K1. I sure hope he's telling me the right figure. grrrr

If it's a schedule C there'l no K-1; as Lion EA said above, K-1's are issued by partnerships, S corps and possibly trusts/estates.

 

[Possi]

3 minutes ago, Lynn EA USTCP in Louisiana said:

If it's a schedule C there'l no K-1; as Lion EA said above, K-1's are issued by partnerships, S corps and possibly trusts/estates.

 

WHEW!

[cpabsd]

Virginia update relating to PPP

After more than a month of back-and-forth debate, the Virginia General Assembly voted last weekend to allow businesses whose Paycheck Protection Program loans were forgiven last year, or who received one of the state’s Rebuild Virginia grants, to deduct up to $100,000 on their 2020 tax returns for eligible expenses paid for by the loans and grants.

The standstill had risked holding up Virginian’s state tax returns and making it more difficult for tax preparers, who didn’t know what the law would be, to assist clients.

[Lee B]

52 minutes ago, cpabsd said:

Virginia update relating to PPP

After more than a month of back-and-forth debate, the Virginia General Assembly voted last weekend to allow businesses whose Paycheck Protection Program loans were forgiven last year, or who received one of the state’s Rebuild Virginia grants, to deduct up to $100,000 on their 2020 tax returns for eligible expenses paid for by the loans and grants.

The standstill had risked holding up Virginian’s state tax returns and making it more difficult for tax preparers, who didn’t know what the law would be, to assist clients.

Interesting approach, specifically how does that work?