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mmpool2
New Member

For 2015, my distributions for an S corp were too high. Turbo tax won't let me record the excess so my balance sheet is off. How do I record it?

 
4 Replies
maglib
Level 10

For 2015, my distributions for an S corp were too high. Turbo tax won't let me record the excess so my balance sheet is off. How do I record it?

An S corp does not pay taxes, the income, deductions and credits flow directly through to the shareholders. Under Sec. 1368, an S corporation’s distribution of cash or property may give rise to three possible tax consequences to the recipient shareholder: a tax-free reduction of the shareholder’s basis in the corporation’s stock,  a taxable dividend, or gain from the sale of the stock (generally resulting in capital gain). These options are not mutually exclusive; a single distribution may result in two or even all three of those consequences.

The treatment of an S corporation distribution depends on the shareholder’s basis in his or her S corporation stock and the S corporation’s earnings and profits (E&P) and accumulated adjustments account (AAA). An S corporation will have E&P only if it was previously a C corporation or it acquired the assets of a C corporation in a Sec. 381 transaction. An S corporation distribution from E&P is treated as a dividend. The treatment of a distribution made by an S corporation without accumulated E&P depends only on the shareholder’s basis in the S corporation stock.

So you basically would not account for an excess distribution as that is not possible under the IRS laws. You would have a return of capital transaction on your hands, not a distribution. This would reduce your basis in the company, and not result in a taxable transaction.


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realware
Level 1

For 2015, my distributions for an S corp were too high. Turbo tax won't let me record the excess so my balance sheet is off. How do I record it?

My S-Corp had retained earnings of $448 in 2019 and $4000 in common stock.

We dissolved it effective December 31, 2019 and liquidated the assets (just a bank account) in February 2020.

We had no income in 2020 and expenses of $516, so a net loss of $516.

When we liquidated the assets, we disbursed $3484 = $4000 - $516.

In entering information into TurboTax for Business for the computation of retained earnings for 2020, would it be $(68) (448 - 516)?  Or $(3552)  (448 - 516 - 3484)?

Critter-3
Level 15

For 2015, my distributions for an S corp were too high. Turbo tax won't let me record the excess so my balance sheet is off. How do I record it?

All Profits are Allocated to the Shareholders

In technical lingo, an S corporation is not permitted to have any retained earnings. This is different from a regular corporation, which can retain—and pay taxes on—its earnings.

 

 

So are you in the wrong program ?   Did you mean to choose the C-Corp instead ?  

Critter-3
Level 15

For 2015, my distributions for an S corp were too high. Turbo tax won't let me record the excess so my balance sheet is off. How do I record it?

https://smallbusiness.chron.com/s-corporation-pay-taxes-retained-earnings-67061.html

 

You seem to have an accounting issue not a tax return situation. 

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