Schedule K-1- distributions from an S Corp

[mikeTT220]

Our situation:

* We use Turbo Tax Business for filing our S-Corp taxes (a single person S-Corp)

* This software is used for generating a Schedule K-1 for a distribution from the S-Corp.  The S-Corp pays a reasonable salary in wages, so the amount of the distribution is not my question.

* In 2020, we had a distribution of $22K that we need to claim as taxable on our personal income via a K-1 (we use TT Home and Bus for this).

* Cell 1 of that Schedule K-1 shows $73K, which is the net income of the business, which is obviously more than the $22K of the distribution.  The amount of the distribution is given in cell 16D "Property Distributions".

Now to the problem: Upon entering the value in cell 1, our personal taxes are computed based on the $73K of cell 1, not on the $22K in cell 16, which can't be right since we only received the $22K. 

But, where is the problem?  In the K-1 generated by Turbo Tax Business or in entering that information into  our personal taxes in Turbo Tax Home and Business?

Thanks in advance for any help.

[tagteam]

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@mikeTT220 wrote:

Now to the problem: Upon entering the value in cell 1, our personal taxes are computed based on the $73K of cell 1, not on the $22K in cell 16, which can't be right since we only received the $22K. 

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That is absolutely correct; you are not taxed on the distribution because you are already taxed on the ordinary business income reported on Line 1 of your K-1.

[mikeTT220]

Thank you for the reply.

A couple of questions:

1) So we are taxed on the business income in Line 1 even if we did not pull it out of the business?  We distributed just 22K and left the remaining with the business.

2) What is the meaning of cell 16D Property Distributions in that case?

[tagteam]

You are taxed on the business income on Line 1 regardless of whether or not you made a distribution.

The amount on Line 16D does not directly impact your return but it does reduce your basis.