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Shareholder left in 2020

My s corp went from two shareholders to one in 2020. What reporting requirements does this create?

2 Replies
Level 1

Shareholder left in 2020

The change won't affect you reporting requirements. You will still have to file 1020S federal tax return and applicable states' returns, if any. The only difference, you'll issue one K-1 instead of two.

Level 12

Shareholder left in 2020

There are a couple of items to keep in mind:

  • You will need to make sure that the one shareholder's K-1 is marked final
  • Only current year distributions are reflected on the K-1
  • If the former shareholder received any liquidating distributions, those must be reported on a form 1099-DIV in box 9 or 10 as applicable.
  • If the S corporation "redeemed" the one shareholder, then you will need to reduce the AAA by the applicable ownership percentage of the former shareholder if the redemption qualified as a sale or exchange.  Based on the limited facts, it appears that it does qualify since the former shareholder completely terminated their ownership.
*A reminder that posts in a forum such as this do not constitute tax advice.*
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