In this guide, we will show you everything you need to know about how to account for ppp loan forgiveness, so keep reading!
Below you can find out 5 different methods to account for ppp loan forgiveness,
- Method 1 – How To Record Ppp Loan Forgiveness In Quickbooks Desktop
- Method 2 – How To Record Ppp Loan Forgiveness In Quickbooks Online
- Method 3 – Easy Step-By-Step Directions To Apply For Ppp Loan Forgiveness In 5 Minutes (No Documents Required)
- Method 4 – How To Account For Paycheck Protection Program (Ppp) Loan Forgiveness
- Method 5 – Get 100% Ppp Forgiveness & Avoid Waiting For Your Lender [Complete Guide]
Method 1 – How To Record Ppp Loan Forgiveness In Quickbooks Desktop
Welcome to how to record ppp loan forgiveness in quickbooks desktop my name is matt holtquist with the quickbooks university. Uh so i did a previous video on how to do this in quickbooks online and i wanted to show. You how to do this in quickbooks desktop okay so you have your ppp loan and you have applied for. Forgiveness and you just got a notification that the ppp loan was forgiven so you have to go in and.
Record this in quickbooks okay so if youve watched one of my other previous videos or you know maybe you. Havent but you already have your ppp loan recorded in your quickbooks file it should be set up as a. Liability okay so im going to go over here to the balance sheet and just show you if we look. Down here ive got a liability set up as ppp loan okay so when you got the money uh it. Was in this example 75 000 you got this money and you deposited it in your bank account and it.
Would be set up as a liability in this example this is set up as a long-term liability ppp loan. Seventy five thousand dollars so when you get it forgiven you have to move this off of your balance sheet. So it is no longer a liability because you dont owe this money anymore okay so in the latest stimulus. Package they came out and said that okay the forgiven ppp loan is not income and you can also deduct. The expenses associated with that loan okay so the rent uh the payroll the utilities etc that you use to.
Get forgiveness that you spent this money on is you can deduct those expenses and the forgiven amount is not. Considered income so the question comes up okay where do we put this how do we record this in our. Accounting records and im going to show you what weve been telling our clients to do and our recommendation how. To record this okay so again weve got to get this off of the balance sheet okay so now this. Gets a little bit complicated if youre not familiar with journal entries but im going to walk you through this.
All right so first of all what we want to do is we want to go up to the company. Drop-down menu and youre going to see an option here that says make general journal entries okay so youre going. To click on that and its going to bring up this screen and this is why it gets a little. Confusing is because youve got debits and credits and you know and a lot of times this gets very confusing. For people okay so were going to put in the date were going to say its 12 15 2020 that.
We got our forgiveness okay the entry number uh you dont need to put an entry in here typically we. Will put our initials within our firm of whos doing a journal entry okay so whatever you put in there. You could put that in there all right so first of all were going to go to the account and. This is going to be ppp loan all right we want to zero out this balance and to zero out. A liability youre going to going to debit the liability okay so were going to say 75 000 and we.
Are going to say to reflect ppp loan forgiveness okay all right we dont need a name uh if you. Do class tracking you of course can put in your class tracking but now we need our next account okay. So im gonna set up a new account so im going to hit my drop down menu and im going. To say add new and we are going to put this as other income okay and im going to explain. This in a minute so this other income account im going to skip the account number so lets not worry.
About that were going to call this non-taxable ppp loan forgiveness okay we want to make sure that we are. Signified that this is non-taxable income okay so this will still show up on our profit and loss as other. Income but the important thing is theres going to be adjustment on your tax return that shows it as non-taxable. All right so if youre a schedule c business it just wont show up at all if you are a. Partnership or an s corporation there is an adjustment thats done on the tax return to show it as income.
On your books but not taxed on your tax return this is going to become very very important so you. Want to make sure that if youre doing your tax return or if you have somebody preparing your tax return. That they know that this is non-taxable ppp loan forgiveness okay so were going to hit save and close and. The journal entry will automatically balance so itll put a credit in there and balance this journal entry okay so. Im going to hit save and close all right so well see what it does here youll see that the.
Ppp loan is no longer on the balance sheet all right now of course this is as of 2023 thats. Okay it doesnt show up anymore its gone but now we want to go over to the profit and loss. Okay and im going to do this from 1 1 2020 and my guess is because this is a sample. File its only going to have this non-taxable ppp forgiveness because it has data in 2023. Okay but now you.
Can see that this shows up on your p l so if there was other activity in 2020 in this. Sample company file youd have your your revenue your cost of goods sold your expenses etc and then at the. Very bottom of the p l youre going to have this other income non-taxable ppp loan forgiveness okay so we. Want to signify again uh separate this out from other revenues so it doesnt show up as uh you know. Revenue from operations and we want to make sure that we dont include it in taxable income when we prepare.
The tax return okay so pretty straightforward you just want to make sure you get it off your balance sheet. Put it over as other income and you should be good to go and you make sure you signify that. It is non-taxable ppp loan forgiveness all right any questions any comments feel free to leave those below also head. Over to the quickbooks university have a fantastic training over there and i also answer your personal questions at qbuniversity.org.
Method 2 – How To Record Ppp Loan Forgiveness In Quickbooks Online
Welcome to how to record ppp loan forgiveness in quickbooks online my name is matt holtquist with the quickbooks university. So i want to walk through with this latest uh stimulus package that just recently came out and hasnt been. Signed by the president yet but its anticipated that it should be so well see now within that legislation uh. They did clarify that uh expenses that you paid with your ppp loan to get the forgiveness are now deductible.
Okay so this was a big thing with the irs and with congress the irs was saying hey this is. Basically taxable in a roundabout way because you could not deduct those expenses but then congress in this latest bill. Clarified that okay if you get your ppp loan forgiven or you anticipate it to be forgiven then you can. One not only have to pay it back two you dont have to pay tax on that money and three. You can deduct those expenses uh that you used with that ppp money to get the forgiveness okay so we.
Gotta figure out how do we record this in quickbooks all right so the first thing i want to do. Is im in quickbooks online this is a just a sample company file i want to go to reports and. Just show you uh weve got our balance sheet okay so im going to go to the balance sheet and. Were going to look here were going to say okay we have our ppp loan as a long-term liability so. When you got your ppp money you know originally when you set it up this would have been a liability.
And so we set this up on our balance sheet and now we have to get it off of our. Balance sheet because we got forgiveness and weve got to move it off of here because its no longer a. Liability we dont owe this money to anybody at this point and so we need to get it off of. Here so what do we do how do we show this in our books all right so what we want. To do is were going to show this were going to move it to other income on the profit and.
Loss statement all right and this shows up at the bottom of the profit and loss statement all right and. We want to signify that this is non-taxable income so well signify that in the name of the account now. Whats really really important here is that itll be showing as other income on your books and in your profit. And loss but when your tax return is prepared depending on you know if youre an s corporation or a. Partnership or something like that youre gonna have to signify on the tax return that this was income but it.
Was not taxed okay and thats very simple to do so if you have your tax returns prepared the preparers. Should know how to do this if you dont have them prepared you know you may want to have somebody. Just take a look at it that does tax returns make sure youre doing it right its going to be. Whats called a schedule m1 adjustment and itll basically back it out of your taxable income so that you dont. Pay tax on it okay but in quickbooks what we want to do is we want to move this over.
To the profit and loss statement all right now to do that the easiest way is going to be to. Do a journal entry okay so were going to go up to here were going to click on new and. Youre going to see over here a journal entry now journal entries for people that you know have not done. Them can be a little bit complicated you got debits and credits and all that kind of stuff so lets. Walk through this so first of all were going to put the date were going to say the date it.
Was forgiven lets say its today 12 27 2020. All right so the first thing were going to do is. Were going to choose that liability account were going to choose ppp loan all right and to reduce the liability. All right this gets deep into accounting but to reduce a liability on your balance sheet in a journal entry. You want to do a debit so were going to put in 52 000 and were going to say to.
Reflect forgiveness of ppp loan all right we dont need a name and then over here were going to go. And were going to look for other income and if we go down to the bottom okay we dont have. An account so we need to go ahead and set up a new account so im going to go here. And i am going to say lets see other income all right now the its important to put it as. Other income because it doesnt mix it in with revenue it doesnt mix it in with sales we really dont.
Want to show it up at the top of the profit and loss as sales okay so were going to. Say other miscellaneous income and were going to say and you can call it whatever you want but im going. To say non-taxable ppp loan forgiveness okay im doing this now thats kind of a long account name but im. Doing this because i want to signify and i want people to know that hey were showing this as income. But this was non-taxable ppp loan forgiveness all right if you want you can put a description in here but.
Its not necessary and then were just going to say save and close all right so non-taxable ppp loan forgiveness. It will automatically put it in as a credit because it balances these have to balance an accounting all right. So once you do this you can go down here and hit save and close and i want to show. You what this does on the profit and loss and balance sheet okay so that was 12 27 this is. As of november 30th so i want to change the date lets just say to 12 31 when i run.
Report youre going to see that it is no longer there its gone its showing as a zero balance and. Now i want to go over to my reports and i want to go to my profit and loss statement. And were going to say this month all right so i hit this month and youll see here now it. Shows non-taxable ppp loan forgiveness 52 000 okay and then again on a tax return this income will not show. As taxable income and and thats very very important because even though its showing on this profit and loss statement.
In your books as money that came in the door you want to make sure on the tax return that. It shows as non-taxable income okay any questions any comments feel free to leave those below happy to answer those. For you and also head over to the quickbooks university you can head over there qbuniversity.org and i look forward. To seeing you soon.
Method 3 – Easy Step-By-Step Directions To Apply For Ppp Loan Forgiveness In 5 Minutes (No Documents Required)
What is up welcome to my channel yall the side hustle apps channel this channel is for hustlers entrepreneurs anybody. That is looking to earn or have multiple streams of income if that is you subscribe to the channel yall. So today yall is very important im excited im i hope yall excited because today yall im about to go. Over how you can apply to get your loan forgiven that ppp loan that you got how you can get.
That loan for giving without uploading any documents how i know because i already did it i didnt upload any. Documents it said no documents needed all i did was just literally make all my pp loans salary and it. Said no documents needed yall and im about to show yall exactly how easy it was so if you earned. Or got if you got at least 150 000 or less from the sba through the ppp loan you can. Go to this online portal and give forgiving all right for your ppp loans if you made over 150 000.
I dont even know where you go honestly i dont i dont even know but this is for people who. Made fifty thousand dollars or less if youre independent contractor if youre a sole proprietor if youre a gig worker. Yall yall about to really see how super easy it was to do it okay it literally took me like. Five minutes to do it yall no lie so lets get into this video lets get these loans forgiven so. We can move on with our lives you know what i mean all right yall so im here at directforgiveness.sba.gov.
Okay and of course im gonna have the link in the description so yall can just click to it go. Straight to the sva ppp direct forgiveness portal and apply for your loan forgiveness okay yall this is super easy. I promise yall it aint its not stressful its not complicated its its very seamless and easy so what you. Want to do when you come to direct forgiveness.sba.gov is basically you have to register register to start your request. So it says this portal is made available by the us small business administration to streamline forgiveness processing for ppp.
Borrowers after registration you may use this streamlined process to automatically submit your forgiveness request to your lender if you. Have any questions or anything like that they do have a live customer service that you can call at this. Number right here so basically when you come here you obviously want to register to start your request okay so. Super easy to sign up come up with the username make sure you write all this down the email address. Maybe that you actually use when you got your ppp loan but it doesnt say that its required so email.
The dress that you can remember that you can get access to now the password job because it took me. A minute i didnt even read this im just coming up with my passwords the password has got to be. At a minimum of 12 characters okay at least one uppercase letter one lowercase letter one number and one special. Character so make sure yall that is 12 characters which is a lot and definitely you want to put that. The password somewhere just in case you need to access this um portal again so once you do that you.
Have signed up make sure you do the captcha sign up and then its going to take you into the. Next step or you can now start applying to get forgiveness for your ppp loan all right so when you. Actually register you you are going to have to um verify your email address all right you have to verify. That and confirm that so once you confirm your email address and all that information then you can move on. To the actual application portal and start the application to get your loan forgiven now when you log in after.
You have verified your email and all your information theyre going to have you verify a phone number it cant. Be a voice over ip number it has to actually be it has to be a real phone number yall. Theyre going to send you a code to help you verify that number so make sure that you have a. Legit phone number thats not a voice over ipm so once you have verified your phone number like it says. Its going to be about 10 minutes or less for you to apply for your loan forgiveness just make sure.
That you have your original ppp loan amount and your social security number as well our itin number or whatever. You use when you got your ppp loan make sure you have that information but other than that lets get. Into this app okay once you have verified your phone number youre going to get a page that looks like. This all right youre going to click on start new forgiveness request okay once you click this its going to. Take you to another page where youre going to put in your social security number your ein number um or.
Whatever you use itin number when you apply for your ppp loan and its also going to ask for your. Ppp loan amount all right yall so this is the next page where youre going to have to put in. Your ein number your social security number or your itin number that you use when you got your ppp loan. Youre also going to have to put in your ppp loan amount make sure you put in the exact amount. And of course youre going to click find your loan all right once you hit uh find your loan this.
Is going to pop up yall its going to have your loan information your lender your loan amount ppp loan. Draw one draw two as you can see ive already started the first draw so im working on the second. Draw but this is basically what itll look like and youll just so youll just hit select all right for. Both of these youll hit select and itll take you to the next page where you can input all your. Information all right yall this is super easy super super easy to do this application for your forgiveness all right.
For the loan so once you hit select your loan details is going to come up on the next page. All right its already going to be pre-filled information your name your ein number your address all that information is. Already going to be pre-filled so all youre going to have to do yall is literally put your title in. Your primary contact name all right yall so covered period is when you got your loan all right so make. Sure to put the correct date which is when you got your loan automatically the covered period end date is.
Going to pre-fill for you so you dont have to worry about the coverage period end date employees at the. Time of your loan application should be one one only okay just you youre a sole proprietor youre an independent. Contractor youre a gig worker just you okay employees at the time of forgiveness of this request that you are. Doing one okay now this is important the amount of loans spent on payroll the whole entire amount that you. Got was spent on payroll you want to make sure that your coverage period is at least eight weeks i.
Put eight to 24 weeks for mine um once youre done with all that you can do the demographic its. Optional you dont have to answer those questions but once i did all that yall this is what popped up. For me no documents required yall i didnt have to upload anything literally nothing at all it went to my. Summary of my forgiveness request so i can review all my information all your information will pop up here go. Over it your requested forgiveness amount whatever it was will pop up here the most you could do was 150.
000 you submitted then you have to of course sign it its going to take you to where you can. Now electronically sign your applications look something like this here um this is just a little um fake one that. I got from the sba.gov website but this is basically what youll assign once you sign all that initial it. And submit it you are done thats it itll say thank you for submitting your request all right yall so. Thats it i hope this helped um yeah yall get this going to get you along forgiven so you dont.
Have to worry about it any longer yall subscribe like comment and share peace.
Method 4 – How To Account For Paycheck Protection Program (Ppp) Loan Forgiveness
So youve gotten your ppp money congratulations and i know youre hoping that that loan will be forgiven and i. Hope it will be also but when its forgiven how do you treat that in your accounting records so what. Were going to see in this very brief presentation is theres a couple of options for how to deal with. The forgiveness of the ppp loan and the first option were going to look at comes from asc 470 the.
Second option comes comes from asc 958 – 605 so lets start with asc 470 and in the phasma codification. That tells us that when you receive a loan youre obviously going to record the debt on the balance sheet. And then if you are legally released from that obligation then you can you can remove the debt from the. Balance sheet and that guidance comes from asc 405 but you have to be legally released in order to take. The debt off the books now if you look at the codification which provides us with god theres really no.
Direct guidance that deals with a situation where a government loans money to a for-profit entity and then the government. Forgives the loan so people like me have been looking at the codification and trying to find specific guidance that. Deals with this situation and its simply not there but phase b recently came out and said even if youre. Aint even if you are a for-profit entity were going to allow you to follow the knot for guidance now. Why would you want to do that well the not-for-profit guidance it guidance it fits this situation in other words.
This ppp program is its really more or less a conditional grant so the government loans you money with the. Conditions that you keep people employed in and some other provisions in there if you meet those conditions then youll. Be forgiven of the loan if we look at the nonprofit guidance it comes from asu 2019 – oh eight. It was codified is 958 days six oh five but what it says is that in a conditional grant there. Are stipulations so in the ppp program there are stipulations there are conditions that you must follow in order to.
Be forgiven in the standard they call these conditions barriers but if you satisfy or you overcome the barriers you. Satisfy the conditions then youre going to recognize revenue so you recognize revenue when you substantially meet the conditions the. Revenue also could potentially be recognized in stages in other words as you spend the money but a word of. Caution here you really dont want to recognize revenue until you substantially meet the conditions of the ppp loan agreement. In other words until you know until you know you are forgiven and at that point then you can take.
The debt off the books and recognize revenue now when you recognize revenue its going to appear in the income. Statement as grant revenue and i just show it as a separate line and ill show you in a moment. What that would look like but youre going to have grant revenue and what you would not do is offset. That amount against your expenses so youre going to have your expenses and then youre going to have the gross. Amount of the loan that has been forgiven and on the income statement you could just show it is ppp.
Grant and thatll work or you could call it forgiveness of the ppp loan something like that and i think. I would show this as a separate line especially if its material one related question is should you impute interest. For the below market rates and the short answer is no and if you know in the codification theres an. Exception if the government sets the interest rate then theres no requirement to impede interest in summary you can follow. The guidance in asc 470 record the debt and then remove the debt if you are legally released of the.
Obligation the second option and the one that i like better is following asc 958 day 605 treat it as. A conditional contribution to your business and as you meet the conditions as you overcome the barriers recognize the revenue. At that time and it will appear on your income statement is just ppp grant or something like that and. Then the loan would obviously come off the balance sheet so i hope that helps you hope your loan is. Forgiven i hope everything goes well with you your business in the days ahead as we deal with covet nine.
Team so take care and bye now.
Method 5 – Get 100% Ppp Forgiveness & Avoid Waiting For Your Lender [Complete Guide]
A few weeks back the sba launched their very own ppp direct forgiveness portal this portal is awesome but it. Caused a fair bit of confusion however i have great news regarding this portal i found a way that you. Can actually apply for forgiveness for your business before your lender even reaches out to you and this whole process. Takes about five to ten minutes tops its very easy so were going to cover how to check if your.
Loan is eligible to use this portal more than 50 of all loans are actually eligible how to make an. Account and then im going to go step by step through the forgiveness process for my very own pvp loan. That way you can follow along and know exactly what to expect for your business or even have it on. Another screen and just do it alongside actually filling out your own pbp forgiveness then at the end of this. Im going to cover a few problems that may arise along the way or may arise after you submit and.
Then how you can resolve those issues so youll want to watch to the end if you have a pvp. Loan so first you need to determine if you can use this portal so far 1280 lenders have signed up. For the sbas direct forgiveness portal these lenders like i said account for more than 50 of all pbp loans. Now you can figure out if your lender is one of those 1200 or so lenders in one of two. Ways first ill have a link down in the description where you can download a spreadsheet with all of the.
Lenders that have signed up so far this is straight from the sba or second you can make an account. Through this portal the ppp direct forgiveness portal and then use their search tool to look up your loan and. Determine if you can actually use this service to get full ppp forgiveness now the general trend is that very. Large lenders like chase wells fargo are not using this direct forgiveness portal and if you used a site like. Wompley or blue acorn to get your pvp loan it seems like more than 50 percent of their lenders are.
Using this direct forgiveness portal which is great news but many of those lenders have not sent out notifications yet. So thats why you can kind of skip the line if you follow this process and heres an example of. This my business is split into two businesses both of which got ppp loans through womple they have different ein. Numbers so i had to apply for them both separately on one of those im able to use the direct. Forgiveness portal on the other im not at least so far unless that lender signs up later because the lenders.
Were different even though i use wombly for both of those so thats why its important that not all people. Can use this portal but a good chunk of people can now lets cover how you can actually make an. Account and find out if you can get forgiveness thi.
Conclusion – How To Account For Ppp Loan Forgiveness
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