My ending bank balance for 2015 was at 15,000 which will be used in 2016 to purchase more equipment. By listing this info on the balance sheet it is included in the profit on the Schedule K-1 for the shareholders. Can money be kept in the bank without passing it onto the shareholders if it is needed to grow the business?
The income is going to be included in the shareholders K-1 whether the Company retains the cash or distributes it to the shareholders. The only way for it not to have been taxable income would have been for it to be spent on deductible business expenses.
1. Would the retained earnings need to be listed in the K-1 if no taxes are due because of deductible business expenses?
2. Would the retained earnings need to be listed on Form 1040 if the owner is not taking any distributions?
3. Would the retained earnings need to be listed on Form 1040 if no taxes are due because of deductible business expenses?
An S-Corp's Retained Earnings balance is not reported on a K-1 (Form 1120s) Shareholder's Share of Income, Deductions, Credits, etc.
When entering your information to complete your personal tax return (1040) you need to enter the data from the K-1 you receive, not the entire 1120S.
To do this in TurboTax you can follow these steps:
- Sign in and open your return by selecting Pick up where you left off under a section.
- Search for K-1 and select the Jump to link at the top of the search results.
- This will take you to the Schedules K-1 or Q screen.
- Answer Yes and follow the prompts.
- We’ll ask some questions about your K-1, and then you’ll enter the data from the form.
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