[US] COVID-19: PPP loan expenses: making tax time easier

You've gotten your PPP loan, and applied for forgiveness. Now let's clean up the expenses.

The Treasury Department has released the application form for PPP loan forgiveness. Be sure to connect with an accountant and/or your lender with any questions about how to calculate the forgivable amount.

 

The terms of the PPP loan forgiveness are complicated, but the tax implications are simpler: the forgiven amount isn’t taxable income, but the expenses related to the forgiveness aren’t deductible either.

In order to make your 2020 income tax filing easier, let’s organize those non-deductible expenses in a way that’s easy to differentiate, by moving those expenses into a separate account on your Profit & Loss Report.

  1. To start, create a new expense account called "Non-deductible PPP expenses"
  2. Then, get out your forgiveness application or contact your lender to confirm the amount of loan forgiveness you're receiving
  3. Under the Accounting tab in the left-hand navigation menu, select Transactions, then click More and select Add Journal Transaction
  4. The debit account will be your "Non-deductible PPP expenses" account, for the full amount of the forgiveness
  5. The credit account(s) will be the expense categories that you received the forgiveness for, such as "Payroll Gross Pay," "Rent," "Utilities," etc.
  6. Click Save, and you're done!

 

By doing this, it will be easy for you to simply omit the “PPP Forgiveness” income and related "Non-deductible PPP expenses" from your tax return.

Need help with bookkeeping the rest of the loan (including the forgiveness income)? Check out our other article here!

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