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dougemde
Level 1

S Corp K-1 distribution automatically entered as dividend?

I took distributions from my S-Corp in the form of a loan repayment and normal distribution.  Turbo tax filled in the correct boxes on lines 16d and 16e.  In the 1120-S return schedule K lines 5a and 5b are blank.  On my schedule  K-1 the line 16 amounts are added and listed in line 5a as ordinary dividends of the K1 as well as on line 16.    When filing my personal Turbotax return, I fill out the information from the k-1 and it includes the amount from the K-1 Line 5a as income to me.  I think it's a glitch in the Business filing because I've already paid taxes on those distributions through my personal form 8995.  How do I fix it and amend my personal return?  Do I need to amend my S corp return too?

2 Replies
Mike9241
Level 15

S Corp K-1 distribution automatically entered as dividend?

On my schedule  K-1 the line 16 amounts are added and listed in line 5a as ordinary dividends of the K1 as well as on line 16.   

assuming the S-corp did not receive dividend income this should not be. could be a program bug or you may have answered a question incorrectly when preparing the return.  why the amount is on the k-1 but not schedule K is a mystery. you'll need to file an amended S-Corp return so a corrected k-1 can be filed.

 

When filing my personal Turbotax return, I fill out the information from the k-1 and it includes the amount from the K-1 Line 5a as income to me. 

 

don't do this since 5a should b blank based on what you stated. 

 

I think it's a glitch in the Business filing because I've already paid taxes on those distributions through my personal form 8995. 

dividend income from any source is not QBI and thus should not be reported on form 8995.

 

it is difficult to give specific instructions because we have no access to the return.

 

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Rick19744
Level 11

S Corp K-1 distribution automatically entered as dividend?

A couple of comments and observations:

  1. While it is possible to have a glitch, I don't recall any other comments in the forum regarding the software not completing the 1120-S correctly for distributions.
  2. Your facts aren't clear as to which line 16 code is reflected as a dividend; both?  That would be odd and especially not reflected on Sch K as already noted.  
  3. For the line 16E code, there are special rules related to repayment of reduced loan basis.  If applicable you should have a note to explain the tax impact at the shareholder level.
  4. Neither of these lines should be reflected as a dividend
    1. If a "normal" distribution is to be taxable as a dividend, that should be reported separately on a form 1099-DIV by the S corporation and not on the Sch K or K-1.
    2. If there is repayment of a reduced loan basis, that income is ordinary and not a dividend.

Make sure your software is up-to-date.  If you are still having issues, I would contact TT since, as noted by @Mike9241, we can't see your input.

*A reminder that posts in a forum such as this do not constitute tax advice.*
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