Kindly go through the background below and advise on the questions
2021
- Received bank interest income of $X from my S Corp
- Filed Business Tax Return showing Retained Earning of $X
- Business K1 Box 4 showed Interest Income of $X. Box 17 showed $X with code A
2022
- Preparing business tax return showing Loss of $X
- Preparing business tax return with Retained Earnings $0 ($X at start of the year to $0 end of the year)
Questions
- Please let us know if showing Loss of $X in 2022 business tax return is the correct way to reflect in the tax return.
- Assuming that we would have already paid tax for $X on the personal side in 2021 since S Corp is a pass through entity. Please confirm
Thanks
2021
- Received bank interest income of $X from my S Corp
- Filed Business Tax Return showing Retained Earning of $X
- Business K1 Box 4 showed Interest Income of $X. Box 17 showed $X with code A.
box 17 is not income it's merely reporting the interest as investment income this does not affect your tax basis in the S-Corp or retained earnings. if there is nothing in 16D then retained earnings at the end of the year should be $X which is the same number that 2022 should start with.
2022
- Preparing business tax return showing Loss of $X
- Preparing business tax return with Retained Earnings $0 ($X at start of the year to $0 end of the year)
Questions
- Please let us know if showing Loss of $X in 2022 business tax return is the correct way to reflect in the tax return. if there is a loss of $X that is reported and reduces retained earnings
- Assuming that we would have already paid tax for $X on the personal side in 2021 since S Corp is a pass through entity. Please confirm
if you reported the 2021 K-1 properly on your 2021 return you paid tax on that $X of income. it does not get taxed again. in 2022 you get a tax reduction due to the reporting the loss of $X