Treatment of loss in S-corp - negative cash flow

Forum|Forum|7 years ago
June 5, 2019
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In 2017 my S-corp lost a great deal of money because of extremely low sales. This was a temporary condition and I expect a banner year for 2018. I have never run a loss in the 25 or so years I've been an S corp. Usually I take excess profits as a dividend, and make a General Journal entry to net those dividends against Retained Earnings. In 2017 I paid into the corporation and did not take any salary. Do I show negative Retained Earnings this year, or must I formally make this a loan to the corporation?

TurboTax Business Windows

Best answer by PatriciaV

Your cash payment into the S-Corp is considered a Contribution, which increases your equity. This transaction does not affect Retained Earnings.

Report this under Business Info >> Partner/Member Information. Edit the member info, and continue through the interview until you come to the Capital Summary page. Enter the amount you paid into the company as a Cash Contribution.

However, the loss you experienced this year will reduce Retained Earnings. This will be recorded automatically from your entries for income and expenses.

PatriciaVAnswer

Level 15

Your cash payment into the S-Corp is considered a Contribution, which increases your equity. This transaction does not affect Retained Earnings.

However, the loss you experienced this year will reduce Retained Earnings. This will be recorded automatically from your entries for income and expenses.

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Stearman-809Author

Level 2

Thank you, but that leads me to the next question. I zero Retained Earnings each year, so they're negative as of 12-31-2017 till I make my final General Journal entries. My basis in the corporation is $3,000, and my loss is about $12,000. Can I take the loss personally for 2017, or must I wait and take the contribution back in 2018 (which should be a good year).