Retained Earning - S-Corp

[Molytruck]

Hello, I have an s-corp since 2015 and have never closed out my owner draws or contributions until now. When I go to TurboTax I am out of balance the amount of the zero figures for the owner draws and contributions. How can I get TurboTax to match the numbers from my balance sheet? Or do I just continue as I have been without zeroing the accounts at the end of the year? Doesn't seem like I could edit the retaining earnings if that is indeed what needs to be adjusted.

Many thanks in advance.

[ThomasM125 · Accepted solution]

You can change the beginning of year retained earnings balance on line 24 of schedule L along with a corresponding change to line 1 of schedule M2, and that will change the ending retained earnings balance for the current year. However, you need to determine where the distributions ended up on your prior year balance sheet as listed on schedule L and offset the adjustment to retained earnings with a change to that account. In other words, do you have a liability or equity account on your prior year balance sheet where the distributions were entered? If so, transfer that balance to your prior year retained earnings, as that is what you should have done in the first place.

[Mike9241]

it is also possible that you showed distributions on the asset side of the balance sheet.  That account would also be closed to retained earnings.  however, contributions of money you put in are not retained earnings. they should have been shown as 1) loans from shareholder, 2) paid-in capital, or 3) stock. Repayment of loans would reduce the loans from shareholder amount but not below zero. Also at issue would be if they were non-interest bearing. Certain sections of the code (ie 7872) could require they bear interest, otherwise, interest could be imputed 

[Molytruck]

Thank you. Not sure I understand this part. "However, you need to determine where the distributions ended up on your prior year balance sheet as listed on schedule L and offset the adjustment to retained earnings with a change to that account. In other words, do you have a liability or equity account on your prior year balance sheet where the distributions were entered?"

The distributions are in "Shareholder Withdrawals" and Contributions in "Shareholder Contributions."

[ThomasM125]

On your prior year balance sheet schedule L you should see listed your  Shareholder withdrawals account balance and Shareholder Contributions account balance included in an entry on your assets side and Liabilities and Equity side of the balance sheet. If those accounts have been cleared then you need to move the balance in them to Retained Earnings on the schedule L.