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jeff80
Level 1

How do I record an initial EIDL loan advance/grant (max $10k, does not need to be repaid) under Cares Act?

 
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Best answer April 28, 2020

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john-pero
Community Champion

How do I record an initial EIDL loan advance/grant (max $10k, does not need to be repaid) under Cares Act?

You still record it as a loan. It may not need to be repaid but it is  deducted from your eventual EIDL loan amount. Example, you get the 10k now and in two months you receive a 90k net EIDL loan in the amount of 100k - Your repayment is 100k.

 

If you never get an EIDL loan then your upfront 10k is a tax free gift but will assuredly have a tax line in the income section to account for it - income but non-taxable. But for now, call it a loan. At tax time, if this, like any PPP loan, is forgiven you will clear out the loan balance to non-taxable income. Remember that any PPP loan funds get reduced by any $10k advance of EIDL, so they are interdependent

 

Let me explain a little further, Your generous uncle Sam loans you $10k to keep your business afloat and says "don't worry about paying me back". Down the road you need another influx of cash and good ol' uncle Sam out of his unbounded love agrees to give you $90k more but with strings - and those strings are a promissory note for not only the 90 but also the original 10. And, in desperate need of the 90, you readily agree.

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11 Comments
john-pero
Community Champion

How do I record an initial EIDL loan advance/grant (max $10k, does not need to be repaid) under Cares Act?

You still record it as a loan. It may not need to be repaid but it is  deducted from your eventual EIDL loan amount. Example, you get the 10k now and in two months you receive a 90k net EIDL loan in the amount of 100k - Your repayment is 100k.

 

If you never get an EIDL loan then your upfront 10k is a tax free gift but will assuredly have a tax line in the income section to account for it - income but non-taxable. But for now, call it a loan. At tax time, if this, like any PPP loan, is forgiven you will clear out the loan balance to non-taxable income. Remember that any PPP loan funds get reduced by any $10k advance of EIDL, so they are interdependent

 

Let me explain a little further, Your generous uncle Sam loans you $10k to keep your business afloat and says "don't worry about paying me back". Down the road you need another influx of cash and good ol' uncle Sam out of his unbounded love agrees to give you $90k more but with strings - and those strings are a promissory note for not only the 90 but also the original 10. And, in desperate need of the 90, you readily agree.

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jeff80
Level 1

How do I record an initial EIDL loan advance/grant (max $10k, does not need to be repaid) under Cares Act?

John - Thanks. I've been looking for such an explanation. I am going to record this as a long-term liability since it is a 30 year loan.

 

From the SBA site - https://disasterloan.sba.gov/ela/Information/EIDLLoans - "The term of these loans will not exceed 30 years."

 

All the best - Jeff

JayrardsJava
Level 1

How do I record an initial EIDL loan advance/grant (max $10k, does not need to be repaid) under Cares Act?

Assuming you dont get the actual loan but you get just the advance which does not get paid back..... When it gets "moved over" from a loan to Non-Taxable Income would that be an 'income' account or 'other income' account?

Neeterbooks
Level 2

How do I record an initial EIDL loan advance/grant (max $10k, does not need to be repaid) under Cares Act?

Not understanding the "move over to non-taxable income" part of solution because I don't see that option in setting up accounts in COA. 

Neeterbooks
Level 2

How do I record an initial EIDL loan advance/grant (max $10k, does not need to be repaid) under Cares Act?

Not understanding the "move over to non-taxable income" part of solution because I don't see that option in setting up accounts in COA. 

linkinpark9503
Level 1

How do I record an initial EIDL loan advance/grant (max $10k, does not need to be repaid) under Cares Act?

you move it over with journal entries

moralshell
Level 2

How do I record an initial EIDL loan advance/grant (max $10k, does not need to be repaid) under Cares Act?

I am booking it to "other income" so that I do not forget to separate it from taxable income come tax time. The EIDL Grant will not become part of any loan unless you accept other funds from the SBA, so I am simply booking the grant directly to the "other income: EIDL Program". If the client receives additional funds from the SBA, which will require repayment, I will move them over to the "LT Liabilities: SBA Loan" account. I don't see any reason to book it as a loan unless you know the client is planning to accept more funds from the SBA in the future. (Many of my clients are small businesses who simply needed a boost while closed and won't be receiving any loans from the SBA).

liem921
Level 1

How do I record an initial EIDL loan advance/grant (max $10k, does not need to be repaid) under Cares Act?

EIDL Advance of 10k should be recorded as "Other Income," and will be taxable unless you're a public charity.

CGand
Level 1

How do I record an initial EIDL loan advance/grant (max $10k, does not need to be repaid) under Cares Act?

I don't follow your statement that the loan advance needs to be paid back.

 

The loan advance does not need to be paid back. The documentation that was signed for the loan is in addition to the amount of the loan advance.

 

This was also confirmed with a discussion with someone in the SBA Office. 

nwoodard34
Level 2

How do I record an initial EIDL loan advance/grant (max $10k, does not need to be repaid) under Cares Act?

If you don't know what you're talking about, not answering is also an option.  

dixonnicolem
Level 1

How do I record an initial EIDL loan advance/grant (max $10k, does not need to be repaid) under Cares Act?

Hi, 

 

Once you have determined is no longer a loan, but a "gift" you would journal out the exact same dollar amount from the loan account and move it over to a non-taxable income account - which you would need to enter yourself (or you bookkeeper/CPA/Accountant). Obviously, I am assuming you are doing your own books - you will need to add a new COA non-taxable income account in order to create your journal. 

I can't speak to what is "tax acceptable" , as I am not an Accountant or CPA, but I would choose Other Income and then either Other Miscellaneous Income or Other Investment Income. You will need to verify that these are non-taxable accounts. 

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