Let me guide you on how you can set up the forgiveness account and enter it into that account, DanOakHill.

We have few options on how to record the funds received from the Paycheck Protection Program (PPP) Loan and the expenses to which the funds are used. To set up the forgiveness account, follow the steps provided below:

1. In the Chart of Accounts, select Account ▼, and then New.
2. Select Bank, click Continue.
3. Enter a name for the account, like “PPP Loan Funds”
4. Click Sub-account of and choose the bank account from the drop-down
5. Click Save and Close.

Then, create a new loan account in the Chart of Accounts. Here's how:

1. In the Chart of Accounts, select Account ▼, then select New.
2. Select Other Account Types, then select Long Term Liability.
3. Click Continue.
4. Enter a name for the account, like “PPP Loan”.
5. Click Save and Close.

Next, record the loan proceeds received. You can follow the steps below:

1. Select Banking, then select Make Deposit.
2. Change the Deposit To account to the new bank sub-account.
3. In the From Account column, choose the loan account created.
4. Enter the amount received in the Amount column.
5. Click Save and Close.

Read this article for more information: Paycheck Protection Program Loan Forgiveness. However, if you're still unsure of how to do the recording and may have some questions with PPP, I suggest reaching out to your accountant or legal professional. Also, regulations and guidance from the SBA and the U.S. Department of the Treasury on the PPP are evolving rapidly. You'll want to refer to the latest guidance from SBA and Treasury to confirm current program rules.

 In addition, I've also added this article so you can keep track of how you use the funds you get from your PPP loan: Track How You Use Your PPP Loan.

Reach out to us if you have any concerns about your loan forgiveness. We'll always be right here to help you.

I followed airKevin's instructions and added one additional step:  It still appears as income even though the account is labeled "non taxable PPP forgiveness income".  

To correct that I made another journal entry and debited the forgiveness income account for the amount of forgiveness and then credited "additional paid in capital" account the same amount.  This is an equity account and it adds the money to equity of  the company (balance sheet) without affecting the income statement.

If someone can confirm this is correct, that would be great

Good evening, @bigjohn56. 

Welcome to the Community. Thanks for joining in on this thread. 

To be sure this is the best route for your business, I suggest consulting with your accountant about this subject/situation. They'll be able to give you the best accounting advice to ensure everything is accurate. 

If you don't have one, check out this link to find one near you. 

Don't hesitate to reach back out if you have any other questions or concerns. Have a wonderful day! 

I had the same question which was having had the load recorded, how do you record the forgiveness part.  Here is a good reply.  It is the same as was given a few replies back by a wonderful member of the community, but somehow it was not acknowledged or flagged as the proper answer.  Plz see the link below.

https://www.youtube.com/watch?v=2hACIDHQLlc

Now we can all truly have a wonderful day. 

Thank you for the link, it is very helpful. So if I understand this correctly, the presenter is recommending that on your books, the forgiven PPP loan should be set up as income, under a name that clearly says it is "non-taxable" so come tax time, your accountant is less likely to treat it as taxable.

The presenter implies that if you are a C-schedule filer, you don't need to include it in your reported income, and you are done. If you are a non-C schedule filer, you will then have to adjust your income down by the forgiven amount in your tax forms and report it as a "non-taxable" adjustment. So your book income will be higher than your taxable income.

I wouldn't be surprised if the IRS tax forms for 2021 and beyond add a place for this on the tax forms which specifically is for PPP loan forgiveness. If they do, TurboTax and perhaps other tax software apps would hopefully handle it for you.

i tried this and it doubled my debt

Thanks for joining this thread, @sarinaroffe. I'm here to guide you on the actions you need to help take care of your issue about recording your Paycheck Protection Program (PPP) Loan Forgiveness in QuickBooks Desktop (QBDT).

Since the Community is a public forum, and we'll need to collect some personal information to pull up your account, I'd recommend contacting our Paycheck Protection Program (PPP) Support team. They're our specialized team that can guide you on how to record your loan forgiveness appropriately.

Another way to contact them is to click Learn more in the banner at the top of the program window. Then select the green Live Chat button in the PPP Center. Please see the screenshot below for your reference.

To know more about PPP loan forgiveness, please see these articles:

• Paycheck Protection Program.
• U.S. Department of the Treasury

Also, I'm adding these articles to further guide you in keeping track of your PPP loan in QBDT:

• Track how you use your Paycheck Protection Program Loan
• Paycheck Protection Program Loan Forgiveness
• Prepare for Paycheck Protection Program Loan Forgiveness

Please keep me posted on how it goes. Don't hesitate to let me know in the comments if you have other PPP concerns or questions about tracking loan forgiveness in QBDT. I'm always around to help. Stay safe always, @sarinaroffe.

This is how I did it...

1. Create a fictitious bank account called PPP Dummy Bank with an opening balance of the 1st PPP loan amount.

2. Create a PPP Loan account (Long-Term Liability).

3. Transfer funds from PPP Loan to my actual bank account on the disbursement date.

4. Transfer funds from PPP Dummy Bank to PPP Loan account on the forgiveness date.

5. For 2nd PPP disbursement just increase the Opening Balance of PPP Dummy Bank and perform the same two funds transfers.

Please let me know if this is wrong. I think it works.

This is how I did it...

1. Create a fictitious bank account called PPP Dummy Bank with an opening balance of the 1st PPP loan amount.

2. Create a PPP Loan account (Long-Term Liability).

3. Transfer funds from PPP Loan to my actual bank account on the disbursement date.

4. Transfer funds from PPP Dummy Bank to PPP Loan account on the forgiveness date.

5. For 2nd PPP disbursement just increase the Opening Balance of PPP Dummy Bank and perform the same two funds transfers.

Please let me know if this is wrong. I think it works.

My suggestion of booking the forgiveness of PPP loan is rather simple:

Debit the Loan liability account where the loan was originally posted, and Credit the Retained Earnings. 

This will keep your Balance Sheet in true balance, remove the non-existent now liability, and also would not create the income that should be considered to be non-taxable but which is technically impossible to show this way in the company's books or on Federal Income Tax forms.  

The other possible option could be to credit Shareholder Equity account, but I prefer Retained Earnings.

BEST reply on the entire thread!!! Finally an answer.  Short and concise video with all the needed info to post a forgiveness transaction.  Thanks for posting the link! 

This is the best video.  I went there and then had to find the one for QB Online which was easy to do.  This makes the most sense of all the other suggestions on this site.  I'm sure our Accountant will know what to do from here with the Non-Taxable income.

Thanks for such an easy solution

So...the sub-account (bank) for the PPP Funding receipt makes sense; however, what offset account do I use in the journal entry to wipe out the debt on the Loan account; the debt was officially forgiven (on paper) March 2021 and received May 2020.  Equity Draw? or Equity Contribution?

With many S-Corp owners using tax basis for capital accounts, I like the simple approach of decreasing loan balance by the forgiveness amount which I treat as a contribution of capital in the year forgiveness became reasonably assured.  Crediting retained earnings achieves a similar result, but unlike ERC refunds of previously deducted expenses, the non-taxable gain has the effect of increasing owner basis in existing assets without affecting prior year taxable income.  With the many advantages of tax-basis capital accounts, treating the forgiveness as a capital contribution preserves the tax basis of retained earnings/accumulated deficits. 

Bravo, Msolo! You are dead on.