1065-US: Paycheck Protection Program (PPP) loan information

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Depending on how PPP loan forgiveness should be reported for a partnership, the following data entry can be used.

If PPP loan forgiveness in not included as book income

No data entry is needed if PPP loan forgiveness is neither book nor taxable income.

To report PPP loan forgiveness as book income on Schedule M-1

To enter book income not included on the tax return, use the Book income not included on tax return field in the M-1 Book-Inc section of Screen M1M2 in the Balance Sheet folder. Information must be entered in the statement.

  • Enter I (Include) in the Schedule K column to also include this amount on Schedule K, line 18b, Other tax-exempt income. Enter X (Exclude) to exclude this amount from being reported on Schedule K, line 18b.
  • Enter P (Permanent) in the Tax Capital column to also include this amount in Schedule M-2, Net income (loss). Enter T (Temporary) to exclude this amount from being included in Schedule M-2, Net income (loss).

To report PPP loan forgiveness as book income on Schedule M-3

To enter book income not included on the tax return when preparing Schedule M-3, use the appropriate fields in the Income (Loss) section of Screen M3-2 in the Balance Sheet folder. Enter the reportable book amount in the Income (Loss) per Income Statement column, and then use the Temporary Difference and Permanent Difference columns to back the income out for tax return income.

  • To also include this amount on Schedule K, line 18b, Other tax-exempt income, use the Other tax-exempt income field in the Schedule K section on Screen M3-2.
  • Enter P (Permanent) in the Tax Capital column of the Other tax-exempt income statement field in the Schedule K section to also include this amount in Schedule M-2, Net income (loss). Enter T (Temporary) to exclude this amount from being included in Schedule M-2, Net income (loss).

Including loan forgiveness as an increase in partner basis

To increase partner basis, use the Other increases field in the Inc & Dec section of Screen Basis in the Partner Info, Basis folder. Information must be entered in the statement.

Including required statements regarding PPP loans

Per Form 1065 instructions for Schedule K, line 18b, a statement regarding the PPP loans needs to be included with the return. To enter information for the required statement, use Screen KSup in the Partner Info, Basis folder. Enter 2 in the Prt Cdn field to report this statement only with Schedule K. Information entered in Screen KSup will print in a statement for Schedule K, line 20c, Other items and amounts. It will also be included in the electronic file. Per the Form 1065 instructions, include the following information.

  • The partnership’s name, address, and EIN.
  • Which section(s) of Rev. Proc. 2021-48 the partnership is applying: 3.01 (1), (2), and/or (3).
  • The amount of tax-exempt income from forgiveness of the PPP loan that the partnership is treating as received or accrued during the year.
  • Whether forgiveness of the PPP loan has been granted as of the date the return is filed.

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