Retained Earnings adjustment for S-Corp

[ifunlisted]

I'm a single-member S-Corp with pretty simple annual taxes but in 2022 I had more Distributions than I actually had available in my Stock Basis. TurboTax Business seems to have calculated things correctly... it's not allowing the Distributions to be higher than my Net Income plus Retained earnings from the previous year, and it's accounting for the excess Distributions on the M-2 worksheet.

The concern becomes the new Retained Earnings balance. In Quickbooks it continues to track the RE with a positive balance, but in TTB the amount is $0 (which makes sense given the situation). The issue is that my Balance Sheet is now off by the exact amount of the Retained Earnings that were zeroed out. For the time being I just manually entered the RE with the same positive balance as I have in QB.

Two questions...

Does manually changing the Retained Earnings to keep the positive balance matching QB change anything from a tax perspective (vs letting TT take it to $0)?
If it's recommended to let TT take the RE to $0, what adjustment is used to offset the difference in RE and level the Balance Sheet?

[ifunlisted]

Here are the numbers in QB...

Beginning Retained Earnings: $2478

2022 Net Income: $34,079

Full Distributions: $87,936

Ending Retained Earnings: $12,748

Here are the numbers in TTB...

Beginning Retained Earnings: $2478

2022 Net Income: $34,079

Distributions: $36,557

Excess Distributions: $51,379

Ending Retained Earnings: $0

(balance sheet off by $12,748)

[Rick19744]

Your QB numbers do not look correct based on the limited information.

What's reported on the following lines:

• Sch M-2 column (a) line 7
• Sch K line 16d
• Sch M-2 column (a) lines 1 thru 5
• Schedule L line 22 and 23

[ifunlisted]

Thanks for the quick reply. After manually overriding the $0 Retained Earning balance in TurboTax Business to match the $12,748 RE balance in Quickbooks, here are the numbers you asked for...

• Sch M-2 column (a) line 7 = $36,557
• Sch K line 16d = $87,936
• Sch M-2 column (a) lines 1 thru 5: 1 = $2478, 2 = $34,079, 3-5 are blank
• Schedule L line 22 and 23: 22 is blank, 23 = $2500

TurboTax only counted $36,557 (of $87,936) Distributions, which is because that's all the equity that was available in the LLC ($2478 Retained from 2021 plus $34,079 Net Inc from 2022).

[ifunlisted]

I know the excess Distributions will be taxable as Cap Gains, but I'm thinking I need to add an entry in QuickBooks to account for the difference (and have it reflected in the Retained Earnings balance and Balance Sheet). I've come across a few options, but the one that makes the most sense is to enter the excess amount as a loan to a shareholder (me).