To ALL who have this question:
1. There was an announcement 2021-2 on 2/1/21 that states the SBA payments made on existing loans (Not PPP or EIDL) are NOT to be included in taxable income. There is a field in the 1120S or 1065 or 1120 return to report non-taxable income from 2020 COVID relief.
2. To record the payments-Make 6 journal entries as follows:
Principal portion-Debit the loan payable account (either short term or long term depending on how you have your loan set up on the balance sheet up); Credit a NEW GL account-Type: Other Income-NAME: Non-taxable Income-CARES Act Section 1112 SBA Payments.
Interest portion-Debit Interest Expense and Credit the same GL account above.
This will put the entire amount received in the Non-Taxable income GL so it is clear for your tax preparer and the principal portion will be relieved and you will have the interest expense in the P&L.
