Shareholder distributions for an 1120-S return that are calculated automatically and shown on the retained earnings reconciliation summary are incorrect. How do I fix?

[Raeka]

I understand. Had to vent a little. I've never used pro software so I haven't any idea what it would be like.

thanks for your input.

[Anonymous_]

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@Raeka wrote:

I understand. Had to vent a little. I've never used pro software so I haven't any idea what it would be like.

thanks for your input.

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You are most welcome, and I do fully comprehend what you are conveying (it is problematic). 

However, for the DIY-er, there really is no better solution that TurboTax, even with its imperfections.

[ArmyTekcure]

Hi this portion of TTB is limiting the shareholder distribution to the total income amount for the year, but including the previous retained earnings equity, the shareholder distribution should be allowed, and we allowed on previous return.  

 Example:

Shareholder Distribution was entered at $55000

RETAINED EARNINGS RECONCILIATION SUMMARY 

Beginning Retained Earnings = $10000

Plus:  Book Net Income = $50000

Less: Shareholder Distributions = $50000 (this is automatically limited to Book Net Income)

It should populate the $55000 and not limit the amount.

[AliciaP1]

Shareholder distributions are limited to current year's earnings.  The distribution of accumulated earnings (retained earnings) are considered a dividend distribution and need to be recorded and reported (on a 1099-DIV) as such.

[jaymax69]

Interesting I thought it was limited by Retained Earnings/balance at the beginning of the year plus Ordinary Income.  This seemed to make sense since they are all retained earnings anyway until a distribution is taken. 

So my question/concern is what kind of dividend would they be classified as on the 1099-DIV because these are accumulated earnings previously taxes and shouldn't be taxable?  Also what are line 5a and 5b (ordinary and qualified dividends) on the schedule K-1 for if not for that?  Some kind of foreign earned income I believe it references in the instructions...

[jaymax69]

Yes it appears this is not correct.

https://drakesoftware.com/Site/Browse/11747/1120S-Calculating-Schedule-M2