Sub-S Distribution Error: Form 1120S p3-5: Total distributions should be blank ... Enter distributions and/or dividends directly on Schedule K, lines 16d and 17c.

[terryl_tt]

Hi:

I am entering a Sub-S distribution as part of the shareholder information in TurboTax Business.   The ultimate goal is to create a K-1 that I pass to my personal return. Upon TurboTax review, I am told:

Form 1120S p3-5: Total distributions should be blank because you have checked the box NOT to compute Schedule M2 and/or NOT use the Schedule M-2/Retained Earnings Worksheet.  Enter distributions and/or dividends directly on Schedule K, lines 16d and 17c.

The amount appears in Schedule K -- Shareholder Distribution -- and Dividends Smart Worksheet” --Enter total cash and property --and in 16d, Distributions, but not in 17c – Dividend distributions paid from accumulated earnings and profits. All 3 boxes say pretty much the same thing.  So should I just remove the first number in the smart worksheet, leave the number in 16d and add the number to 17c?  If indeed the worksheet is related to retained earnings, I can see why it should not be there.  Retained earnings don’t exist in a Sub-S.  Can someone help me out?

Thanks for your help!

Terry

[tagteam]

Did you not come across the Distributions to Shareholder page in Step-by-Step?

It is right near the beginning (Business Info tab>>Shareholder Information).

[terryl_tt]

Hi tagteam.  Yes, I entered the distribution into the shareholder information.  I had assumed TurboTax would know where to put the number in it's forms, but that was not the case.  Hence the error.  I did the entry right and checked it a couple of times.  I am being forced to edit Schedule K directly and needto know if I am doing it right.

Thanks for your reply.

[MisterMaury]

I am having this same issue and can't get a response from Turbo Tax.  It makes no sense as I filled out the step by step the same as last year, and this year it gives me an error and doesn't put it on the right form.

[terryl_tt]

I was finally able to resolve this.  I made myself a note for next year to do the following:

document dividend distribution to shareholders in Fed Taxes > Balance Sheet section. DON'T SHOW IN EARLIER DIVIDEND SECTION.

Turbotax support isn't really geared to business returns.  I found this tidbit after a bunch of internet searching.  Hope it works for you.

Terry